Without jobs, India's demographic dividend will be a disaster

Discussion in 'Politics & Society' started by Ray, Feb 12, 2014.

  1. Ray

    Ray The Chairman Defence Professionals Moderator

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    Without jobs, India's demographic dividend will be a disaster: Alakh N Sharma

    Jobs in India grew by just 2.2% between 2010 and 2012. Economist Alakh N Sharma, director of the Institute of Human Development and principal author of India Labour and Employment Report 2014, spoke with Rema Nagarajan about why unemployment is rising, the people it hits hardest, manufacturing as a remedy — and how competitiveness goes beyond wages:

    How serious is India's unemployment?

    Unemployment among the educated is very high. As people get more educated, unemployment's only growing. It's highest among women graduates at about 60%. After 10 years, 40% of all girls will be matriculates — but India has the lowest female employment rate along with Pakistan and Middle Eastern countries.

    One-third of our unemployed are graduates and above. If we don't create enough jobs for them, we won't be talking about a demographic dividend — it will be a demographic disaster.

    Why aren't enough jobs being created?

    There's overemphasis on services and neglect of the manufacturing sector. The service sector provides only 26% employment but contributes 58% of GDP. We need to increase the share of manufacturing in GDP. It's currently 16% — compared to South East Asian countries like China, Korea and Indonesia, where the share is 40%-50% of GDP.

    For the first time, agriculture's share in employment is going down in India. But those moving out of agriculture are migrating to low productivity employment. Ideally, they should move into the manufacturing sector. That's what happened in most countries. But the manufacturing sector in India is just not robust enough to absorb them.


    How has growth impacted employment?

    Employment growth was just 0.5% per annum from 2004-05 to 2011-12, the period that saw the highest growth of GDP by 8.5% per annum.

    But for the first time in 2011-12, we're seeing growth in the organised employment sector. There's also been a rise in wages, even rural casual wages. However, the proportion of informal employment in the organised sector actually increased from 41% in 1999-2000 to 58% in 2011-12. So, there's deterioration in the quality of employment created.

    What is the effect of rising informal employment?

    About 92% of India's 470 million workers are informal workers. Informal employment is insecure, poorly paid and has no social security. There's also a difference between wages of regular workers and informal or contract workers. The latter constitute one-third of workers in the manufacturing sector.

    In China, they've done away with the wage difference, mandating equal pay for equal work. We should do the same — the difference in wages is one of the main reasons for widespread labour unrest.

    But can India afford to increase wages?

    India seems to believe in being competitive in the international market by keeping wages low — that is totally wrong.

    In China, wages are up to two and a half times those in India. Yet, China is more competitive than India in the international market. How do they do that?

    Wage cost is a small share of the total cost of production. Wages as a proportion of the total cost of organised manufacturing is falling, from 47% in 1981-82 to 25% in 2011-12.

    How you organise production, infrastructural arrangements and technological innovation are factors that give you a competitive edge — we don't become competitive by saving on labour costs and impoverishing workers.

    Without jobs, India's demographic dividend will be a disaster: Alakh N Sharma - The Times of India

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    This clearly indicates how lopsided our growth is and that it is time to organise production, infrastructural arrangements and technological innovation.

    However, the question remains how?

    Any ideas?
     
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  3. northernarunachalpradesh

    northernarunachalpradesh Regular Member

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    answer is simple NAMO.
     
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  4. Twinblade

    Twinblade Senior Member Senior Member

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    Highways, micro finance, SEZ for SSIs and SMEs with tax holidays and affordable real estate, affordable electricity and vocational training, low turn around time of paperwork for government permits. Entrepreneurship follows. Welders, plumbers, fitters, lathe operators, artisans, and electricians are the fuel for manufacturing.

    Tamil Nadu and some BJP ruled states are doing it better because they are not bogged down by the ideological shackles of other parties. They have identified their core demographic of a young voter, who will vote for them for the next 60 years if his ambitions are met.
     
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  5. amoy

    amoy Senior Member Senior Member

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    hmmm Bangladesh and Nigeria and so on also enjoying demographic dividend like India though without NAMO of their own.

    Sent from my 5910 using Tapatalk 2
     
  6. Energon

    Energon DFI stars Stars and Ambassadors

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    This is a complex question with complex answers like "labor reform" and "land reform", but if these things haven't happened so far it is unlikely they will happen spontaneously in the future.

    In the foreseeable future I don't think anything of significance will happen unless there's a serious effort to build some semblance of a functional** infrastructure. **I have stopped employing terms like "world class" because such notions are futile in India. However, if there were some rudimentary way to move people, goods and services across most inhabitable parts of the country without incurring ridiculous losses then maybe India has some sort of a chance to experience significant improvement.
     
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  7. no smoking

    no smoking Senior Member Senior Member

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    There is a possible way: cut the public budget for highest education and focus on primary school----educating your largest class of population: the poor; show the outside world to them; make them realize how really miserable their life are comparing to those in other developing world. When they have the incentive to change their life, they will support any reform even the radical one.

    Well, based on China's experience, how to get these not so "world class" infrastructures at the beginning is the most difficult part of work.
     
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  8. Energon

    Energon DFI stars Stars and Ambassadors

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    For years I have made countless posts about education reform with an emphasis on primary education. I used to read a lot of peer reviewed literature and even attended numerous academic seminars on the subject held at various Ivy League universities... but after seeing the ground realities I have finally come to accept that all the erudite and intellectualized discussion of this subject matter (well-meaning as it is) is ineffective.

    The reasons for the failure of course are varied and complex, but the fundamental flaw in this otherwise sensible approach is the heavy reliance upon the Indian government. Due to a deadly mix of corruption and social prejudices the likelihood of a successful education campaign aimed at the most destitute masses of the Indian population is somewhere between zero and nil. The problem is that the hinterlands of India are entirely devoid of any meaningful economic activity robbing its inhabitants of any semblance of financial independence. Hence any public initiatives are expected to be powered entirely by good will and patriotism… of which there is none. The reason most of the schools in these regions are empty is because nobody with even the minimalist of skills (like teachers) want to live and work there. The only palpable solution is to facilitate some level of organized economic activity in these isolated regions. While such an undertaking may sound daunting, it actually isn’t. Models from other parts of the country have shown that the only requirement for promoting local economic activity is physical connectivity through roads. Hence if the objective is to get teachers to actually show up in the schools, there first needs to be economic activity in the area and that can only come from roads.
     
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  9. no smoking

    no smoking Senior Member Senior Member

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    Certainly, that is a solution which will require at least another 30 years to see some achievements and then another 30 years to be prosperous. The question is: does India have another 60 years? There is an opinion: once Chinese finish industrial revolution, the door will close for ever!
     
  10. feathers

    feathers Tihar Jail Banned

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    Why there is nothing about farmers ? micro finance is already making problems for the farmers.
     
  11. Energon

    Energon DFI stars Stars and Ambassadors

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    No it won't take 30 years for such an undertaking. India has adequate resources particularly in terms of man power at its disposal if it so chooses to pursue a wide scale infrastructure project; and if the project is localized to the state level along Eisenhower's interstate model the project can be completed in a decade. The state of Gujarat already serves as a testament to this assertion.

    Also I'm not sure I completely understand the opinion you have presented. Are you saying that if China completes its industrial revolution the doors on India's economic growth will close forever? If so that's a silly opinion. This is not a zero sum game, market competitiveness is always transient, this is precisely why China could ramp up its manufacturing capacity in spite of the long standing industrialization in the West.
     
  12. no smoking

    no smoking Senior Member Senior Member

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    Well, I am not so optimistic about this kind of projects can be done in one decays. If we look at China at the early 80s when CCP was on a better position financially and politically comparing to GOI today, it still took 20 years for Chinese to get the initial projects done. For the countries like India and China, man power is never a problem. Instead, equipment, financial support and workers/engineers skills.

    No, it is not my opinion, but someone else. Also, I don't agree with it 100%, but it does have some points.
    The idea is: when China's industrilization is finished, the economic environment will be so harsh that no other developing countries can become the industrial country. Their reasons are:
    1. the resources consumption of the earth will be pushed up to a new level that the profit of low-cost industries become so thin that developing country cannot accumulate enough capital to push the industrilization by itself.
    2. with Chinese industry gets into the new level, the machine/tools price drops so quickly, low labor cost advantage is not so attractive any more.
    3. Unlike other developed country, China has 1.3 billions people. That means China will keep some of its low cost manufacturing sectors even after industrilization. This will squeeze the profit of these sectors even thinner.
     
  13. Energon

    Energon DFI stars Stars and Ambassadors

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    India has the money and over the last 4 decades an army of Indian skilled workers has amassed in the Middle East where they have been busy building a state of the art infrastructure. With a construction downturn in developed nations there is ample expertise and hardware to go around.. at least enough to build a basic infrastructure India needs; and yes it can be done in a decade if the leadership really wants to do it (which I don't think they do).

    I doubt it. Demand changes as do industrial practices and objectives.To say if country 1 industrializes all others can't is a fallacy. This was precisely what people said about Western Europe and America, then the Soviet Union, then Japan, then Korea... and yet things keep moving along.

    Besides I'm not sure the current Chinese cheap manufacturing model is sustainable in the long run anyways. In the coming decades the modes of industrialization will have to change in order to accommodate environmental limitations; China itself will have to adopt a different model. Resources, energy and demand has always been extremely transient. 20 years ago nobody could have imagined the energy potential in shale, a development that is likely to change the entire face of the global energy map as we know it. This is just one example, but the point is that economic opportunity has always been there for those who seek it creatively. The Indian people have certainly shown a penchant for creativity; their biggest impediment is the leadership.

    What countries do need in order to succeed is a stable society with good representative governance and good human resource. If India fails to succeed it's not because China industrialized first, but rather because they were unable to meet the above mentioned requisites. In the same note if China does not adapt to meet these requirements they too risk losing much of what they have now.
     
    Last edited: Feb 25, 2014

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