The problem of job creation in India is turning into a greater threat: an increasing number of people are not even looking for work.
Frustrated at not being able to find the right kind of jobs, millions of Indians, especially women, are dropping out of the workforce altogether, according to new data from the Center for Monitoring Indian Economy Pvt, a private research firm in Mumbai. .
As India bets on young workers to spur growth in one of the fastest growing economies in the world, the latest figures are a worrying harbinger. Between 2017 and 2022, the overall activity rate fell from 46% to 40%. Among women, the data are even more striking. Around 21 million people have disappeared from the labor force, leaving only 9% of the eligible population employed or looking for work.
Today, more than half of India’s 900 million legal working age — roughly the population of the United States and Russia combined — don’t want a job, according to the CMIE.
“The large share of discouraged workers suggests that India is unlikely to reap the dividend that its young population has to offer,” said Kunal Kundu, an economist at Societe Generale GSC Pvt in Bengaluru. “India is likely to remain in a middle-income trap, with the K-shaped growth trajectory further fueling inequality.”
India’s job creation challenges are well documented. With around two-thirds of the population between the ages of 15 and 64, competition for anything beyond menial work is fierce. Steady government positions regularly attract millions of applications, and getting into top engineering schools is practically a roll of the dice.
Although Prime Minister Narendra Modi has prioritized jobs, urging India to strive for “amrit kaal,” or a golden era of growth, his administration has made limited progress in solving impossible demographic calculations. To keep pace with a youth bulge, India needs to create at least 90 million new non-farm jobs by 2030, according to a 2020 report from the McKinsey Global Institute. This would require annual GDP growth of 8-8.5%.
“I depend on others for every penny,” said Shivani Thakur, 25, who recently quit a hotel job because the hours were so erratic.
Not putting young people to work could push India away from developed country status.
Although the country has made great strides in liberalizing its economy, including attracting Apple Inc. and Amazon.com Inc, India’s dependency ratio will soon start to rise. Economists fear the country is missing the window to reap a demographic dividend. In other words, Indians can get old, but not get richer.
A decline in the workforce predates the pandemic. In 2016, after the government banned most banknotes in an effort to eradicate black money, the economy collapsed. The rollout of a national sales tax around the same time posed another challenge. India has struggled to adjust to the transition from an informal to a formal economy.
Explanations for the decline in labor force participation vary. Unemployed Indians are often students or housewives. Many of them survive on rental income, pensions from elderly household members or government transfers. In a world of rapid technological change, others are simply falling behind in marketable skills.
For women, the reasons are sometimes related to security or time-consuming responsibilities at home. Despite making up 49% of India’s population, women contribute only 18% of its economic output, about half the global average.
“Women are not joining the labor force in such large numbers because the jobs are often not conducive to them,” said Mahesh Vyas of CMIE. “For example, men are ready to change trains to get to work. Women are less likely to be willing to do so. This is happening on a very large scale.
The government has attempted to address the issue, including announcing plans to raise the minimum age of marriage for women to 21. This could improve labor market participation by allowing women to pursue higher education and a career, according to a recent report by the State Bank of India.
Changing cultural expectations is perhaps the hardest part.
After graduating from college, Thakur began working as a mehndi artist, earning a monthly salary of around 20,000 rupees ($260) by applying henna to the hands of guests at a five-star hotel in the city of Istanbul. Agra.
But because of the late working hours, her parents asked her to quit this year. They are now planning to marry her. A life of financial independence, she says, is slipping away.
“The future is being ruined before my eyes,” Thakur said. “I tried everything to convince my parents, but nothing worked.”