The mainstream projections about India's economic trajectory talk of how the country's GDP will exceed that of Japan (whose economy today is more than thrice India's size) by 2020. A large part of this sustained growth, it is assumed, will come from what is called the demographic dividend. India's young and growing workforce, the standard argument goes, will ensure that the country's wage rates keep it competitive for a long time, even as the dependency ratio (the number of people depending on active workers) drops while it climbs in most other countries. The growing workforce will also ensure a steady source of demand and, therefore, underpin investment. According to the government's latest report, there will be enough employment for 570 million people in another five years, enough to absorb the 10-11 million people joining the workforce each year.
If only such rosy assumptions could point to future reality! The India Labour Report 2009, by India's largest temping company TeamLease, throws cold water on such scenarios, and argues that the country's demographic dividend could turn out to be a demographic disaster. TeamLease identifies two kinds of problems; one is a theme that has run through its previous reports as well, namely employability. About 89 per cent of 15-59-year-olds, the report says, have no vocational training; of those who have received such training, only a tenth got it from formal sources; the current training capacity is a fraction of the 12.8 million new entrants into the workforce each year.
The government has tried to address the issue through the National Skills Development Corporation (NSDC). Critics of NSDC point out various flaws in its model, including the difficulty that entrepreneurs have in accessing its funds to set up training facilities. There will also be the challenge associated with the industrial training institutes, of keeping the curriculum up-to-date.
The greater challenge that the report identifies is that the states which will experience rapid growth in their population are not the ones that will see rapid growth in incomes. Uttar Pradesh, Bihar and Madhya Pradesh will account for 40 per cent of the increase in 15-59-year-olds in the next decade, but only 10 per cent of the increase in income. Considering that these are also the states where education facilities are the poorest, the quality of the workforce emerging from the heartland is going to be a drag on the economy. The low incomes and lack of investment in these states mean that their ability to employ these youth is equally poor. This combination of factors will translate into high wage rates in other parts of the country, which could erode their competitiveness. Migration will provide some of the answers, but this is not without economic cost, and political risk
