The global economy is passing through a demographic
crisis, with its growing ageing population. India, has an obvious
advantage here, and could provide the world with skills and manpower.
India has the world’s youngest workforce with a median age way below
that of China and the OECD countries. The rest of the world, especially
western countries, are ageing rapidly because of low fertility rates and
increased longevity. Consequently, according to the Union government ,
the global economy is expected to witness a skilled manpower shortage of
around 56 million by 2020. Thus, the ‘demographic dividend’ in India
needs to be exploited to meet the skilled manpower requirements in India
and abroad.
The demographic dividend not only
implies increased labour supply but also a challenge in finding capacity
in the economy to absorb and productively employ extra workers. To make
a larger number of people employable would necessitate large investment
in human capital. Investment in educational and vocational training
needs to be strengthened if India has to successfully reap the benefits
of the demographic dividend.
In 2011-12, according
to the Centre, in nearly 18 per cent of households in rural and 6 per
cent in urban areas, there was not a single member in the age-group 15
years and above who could read and write a simple message with
understanding. Similarly, the recent report by the National Sample
Survey Organisation states that during the survey period of July 2011 to
June 2012, nearly 25 per cent of males and 29 per cent of females in
the age range 5 to 29 years did not consider education necessary to eke
out a living.
Again, nearly 25 per cent males in the
rural areas and 33 per cent in urban areas reported that they did not
attend educational institutions because they needed to work to
supplement the household income. In the case of nearly 30 per cent
females, the reason was that they had to attend to domestic chores.
In
the case of vocational training, the situation is worse. Amongst
persons aged 15 to 59 years, only 2.2 per cent reported to have had
formal vocational training; 8.6 per cent received non-formal vocational
training. As expected, the situation in rural areas was worse than that
in the urban areas. Amongst rural males, the most significant share of
vocational training was driving and motor mechanic work while for
females, it was textiles-related work.
High expectations
The
demographic dividend is expected to result in nearly 20 million people
joining the workforce annually in the next 10 years. With the rising
level of income, the expectations of people, especially the young, are
also rising. The next generation of farmers want to be part of the
growth India story and therefore out of the agriculture sector. To
absorb such a large labour force, it is necessary to plan for
appropriate vocations and employment opportunities. Narendra Modi
recently observed that India will now need large number of ITIs, and a
new ministry of skill development and entrepreneurship would coordinate
the skill development needs of the country. The Pradhan Mantri Kaushal
Vikas Yojana has been announced to encourage skill development for youth
by providing monetary rewards. While all these efforts are encouraging,
the fact remains that skill development strategy has yet not been
successfully implemented.
India’s workforce of
nearly 484 million in 2012 could increase to 850 million by 2025,
accounting for nearly one-quarter of the global workforce. MSMEs, with
their flexibility and low cost, easily adapt to new technology and can
help in strengthening the manufacturing sector. In fact, MSMEs have the
potential to absorb the increasing labour force while helping to realise
the potential of the Make in India strategy. The need is to explore new
areas for MSMEs.
(The writer is the RBI chair professor of economics, IIM-B)
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