By Dr. Gyan Pathak
‘India is Rising’ – Prime Minister Narendra Modi goes on telling people during his election campaigns and giving guarantee for a Developed India by 2047. However, the latest World Bank report on ‘Job for Resilience’, the latest South Asia Development update, a twice-a-year regional outlook reveals that in Modi’s Rising India, there are only limited opportunities for employment to grow for common people, while output growth is expected to reach as high as 7.5% in 2023-24 before returning to 6.6% over the medium term. It means we have a jobless growth in India, a best example of squandering of the demographic dividend.
India is the largest populated country in the world, and as the report reveals it is also the fastest growing economy that would be responsible for South Asia growing at 6 per cent in 2024. However, persistent structural challenges threaten to undermine sustained growth, hindering the region’s ability to create jobs and respond to climate shocks. The regional growth is projected to be 6.1 per cent in 2025, but this strong outlook is deceptive, the report emphasized.
World Bank said in the report that private investment growth has slowed sharply in all South Asian countries and the region is not creating enough jobs to keep pace with its rapidly increasing working-age population, putting the region on a path that risks “squandering its demographic dividend.”
“South Asia’s growth prospects remain bright in the short run, but fragile fiscal positions and increasing climate shocks are dark clouds on the horizon,” said Martin Raiser, World Bank Vice President for South Asia. “To make growth more resilient, countries need to adopt policies to boost private investment and strengthen employment growth.”
In the entire region, the share of the employed working-age population has been declining since 2000 and is low. In 2023, the employment ratio for South Asia was 59%, compared to 70% in other emerging market and developing economy regions. It is the only region where the share of working-age men who are employed fell over the past two decades, and the region with the lowest share of working-age women who are employed.
“South Asia is failing right now to fully capitalize on its demographic dividend. This is a missed opportunity,” said Franziska Ohnsorge, World Bank Chief Economist for South Asia. “If the region employed as large a share of the working-age population as other emerging markets and developing economies, its output could be 16% higher.”
“The danger is the demographic dividend is missed. It’s squandered,” said Franziska adding “If only they can be employed. It’s a fantastic opportunity to grow but until recently employment ratios have been falling.”
The declines in employment ratios over 2000–23 in Bhutan, India, and Nepal ranked in the bottom quartile among other Emerging and Developing Economies (EMDEs).During the 2010s, employment growth was exceptionally weak compared with other EMDEs. Over 2000–22, the employment ratio declined by more than in any other South Asian country except Nepal. Overall, during 2000–23, employment growth was well below the average working-age population growth and the employment ratio declined.
On average during the 2020s, working-age population growth in the region is projected at 1.3percent a year (compared with 0.9 percent a year in all EMDEs). That said, this still represents a slowdown by one-fifth from the 2010s and working-age population shares are expected to peak in the early 2030s in Bangladesh, Bhutan, and India.
During 2010-23, net migration from South Asia represented a loss of about 2 per cent of the region’s working age population. Large scale emigration may in part reflect poor job prospects.
The employment weakness appears to be concentrated in non-agricultural sectors: in India, Nepal, and Pakistan, long-run employment ratios in non-agriculture are well below those in the average EMDE, whereas agricultural employment ratios are broadly in line (and above-average in Nepal). In all South Asian countries except Nepal, women’s long-run employment ratios are significantly below the EMDE average.
Regression analysis suggests that declining employment ratios reflect, in part, a more challenging institutional and economic environment than elsewhere, which has stunted firms’ growth.
Employment weakness appears to be concentrated in the non-agriculture sector. In India, Nepal, and Pakistan, employment ratios are estimated to be converging toward steady-state levels that are well below-average in non-agriculture—by 11 percentage points in India and 16 percentage points in Nepal and Pakistan—but near-average (India, Pakistan) or well above-average (Nepal) in the agricultural sector. This suggests that sluggish structural transformation may be at the heart of South Asia’s employment weakness.
To realize the demographic dividend that could be reaped from its still growing working-age population, South Asia needs to create jobs. South Asia’s employment growth has been below growth of its working-age population—during 2000–23, employment grew by 1.7 percent a year and the working-age population expanded by 1.9 percent a year. Raising employment growth above the growth rate of the working-age population, and thus lifting employment ratios, would raise the growth rates of output and output per capita, help to reduce the region’s above-average poverty rate, improve its precarious public finances, and thus help to address long-standing development challenges, the report emphasized. (IPA Service)
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