Skilling India The Billion People Challenge A Report By Crisil Centre For Economic Research

Evolving demographics unambiguously point out that India will remain a young nation

and the largest contributor to the global workforce over the next few decades - an exceptional strength compared to the rapidly ageing population in the Western countries, and that in China, owing to its one-child policy.

Although investment, reforms and infrastructure are likely drivers of Indias economic growth, no growth driver is as certain as the availability of people in Indias working-age group. A young population is Indias demographic dividend. It gives India the potential to become a global production hub as well as a large consumer of goods and services. Further, since the age-group of 45-60 years is the key contributor to household savings, Indias savings rate, which has increased rapidly in the last decade, will get a further boost thereby supporting investment.

The rise in its working-age population, however, is necessary but not sufficient for India to sustain its economic growth. If India does not create enough jobs and its workers are not adequately prepared for those jobs, its demographic dividend may turn into a liability.

This report examines the pros and cons of the swelling working-age population by taking stock of Indias likely demand for labour. It analyses Indias labour-market imbalances and highlights how skill mismatch and shortage can impact productivity growth which is critical for India to enhance its long-term growth. And finally, it identifies fiscal implications of Indias population dynamics.

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Conclusion

Favourable demographics position India to fill the void created by countries with an ageing population, and become a major player in global business. The manner in which India uses this opportunity will determine whether it will reap its demographic dividend. Apart from tackling spatial challenges arising from a remarkable disparity in the demographics of its states, India will have to address the critical issues of creating jobs and preparing its youth to participate in its economic growth.

India will need to alter its policy framework and give incentives for creating sufficient jobs and alleviating workforce skill-mismatch. If status quo persists in Indias policy frameworks for education and training, and workforce management, economic growth will soon hit a speed breaker. If labour and industrial policies are not reformed, people with different education and skill levels, or from different states, would have unequal economic prospects. Indias industrial sector may not be able to scale up to absorb the excess workforce in agriculture. This could, in turn, block efforts to reduce income inequality in India.

In addition to government initiatives, corporate investment in employee education and training would continue to play a critical role to meet the rising demand for high-skilled workers. A number of Indian corporates, especially from IT/ITeS, already provide focused training to improve their peoples skills. Also, some corporates, like CRISIL, have a study-work programme that equips a graduate with analytical and financial skills, and then absorb the trained candidate in their operations.

Although an increased rate of savings and investment, which India has achieved and sustained since the early 2000s, is essential for ensuring a rapid pace of economic growth, an educated workforce and job opportunities are critical for sustaining the growth over a long period, and for realising the demographic dividend. This would be especially true for India since it depends more on its human capital than its peer countries that are at a similar level of economic development.

by: Jillian Kramer

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