How India is wasting its potential demographic dividend

Once considered a formidable asset, has India’s demographic bulge turned toxic due to the country’s lost economic decade?

For the better part of the past decade, India was touted as the next big economic growth story after China because of its relatively younger population. “Demographic dividend” – the potential resulting from a country’s working-age population being larger than its non-working-age population – was the key phrase.

Come 2022, the median age in India will be 28, well below 37 in China and the US.

The huge surplus of working-age people should have given the country a competitive edge with cheap labour. Instead, there has been an unemployment crisis.

Since the global financial crisis of 2008, a slew of factors, from a burgeoning bad-loans problem to a lack of social reforms to knee-jerk policy reactions, have placed the potential of youth in a chokehold.

In the absence of conducive economic, social and political conditions, India risks squandering its advantage by “creating a young and angry population, and with it conditions for social unrest and economic disaster”, investment bank Espirito Santo warned back in 2013. The worrying trend has been exacerbated, and the demographic dividend has become more of a demographic drag, or worse, a demographic demon.

High unemployment rates

Since India’s stellar growth got derailed by the 2008 recession, it has struggled to get back on track.

More than a decade on, its fiscal deficit has not fully recovered as companies failed to clear debt, and banks ran low on fresh capital. While the GDP rate began recovering before the pandemic hit, the noise on the ground was far less promising, with political turmoil fueling economic discontent and insecurity among citizens from all walks of life.

In the latter half of the decade, the government made some hasty and unpopular decisions. For instance, in 2016, the demonetisation of Rs 500 and Rs 1,000 bills hit without warning. The move immediately crippled the poor and left financiers clutching their wallets.

Then, the July 2017 introduction of a goods and services tax further fueled uncertainty and compliance issues. Together, the two created a slump in corporate investment, and therefore jobs.

And while job creation stagnated, the public sector did little to help. In fact, in recent years several employment-oriented programs run by the government have been subjected to budget cuts, if not shelved entirely.

With the Covid-19 pandemic, recovering from the decade-that-was now seems even trickier. In addition to straining infrastructure and existing workforces, the disruption it wrought has created long-term job losses.

Education system

Sheer numbers of young people will not help India’s economy grow. It is the quality of talent that will determine their actual impact – and that should concern India.

The rot sets in early, during the school years, to be precise. A cocktail of poor quality instructors, outdated curricula, inadequate infrastructure and time-consuming certification processes have kept India’s education system tied up in knots, a 2019 United Nations Children’s Fund report found.

Skilled workers are rare. Of the 13 million youngsters that join the workforce each year, only one in four management professionals, one in five engineers, and one in 10 graduates are considered fit for jobs. Among the large swathes of college graduates, most are deemed unemployable.

“Knowledge-based industries have become more prominent, and jobs that require a higher level of skill have gone up in demand,” said Anandorup Ghose, partner at Deloitte India. “While this has meant that the perception of India as a destination for higher quality has become more important than a destination for labour arbitrage, it has also meant that there are greater expectations of skilled resources being able to provide world-class standards.”

“The education and training industry has struggled to keep pace with this, and there has been a clear case of an inverse relationship between quality of talent and availability,” said Ghose.

Additionally, the country pays no heed to training beyond textbooks. At both the school and college levels, rote-learning dominates. Hands-on education and internships are few and far between. Few graduates have people skills or soft skills because they are rarely the priority. As a result, the supposedly skilled talent that the many Indian institutions churn out by the millions is not exactly prepped for the jobs market.

Gender and caste

Access to education and training opens some doors in the job world, but walking through them is another matter altogether.

The recruitment process can be haphazard and ridden with corruption (and often nepotistic), making it difficult for those without the right contacts and recommendations to make it.

Jobseekers often end up working in roles they are overqualified for only to get some security and pay off student loans.

Now, with the jobs market shrinking because of the pandemic, “young people will be more willing to accept less pay and poor working conditions, just because they are so desperate to make a living”, Sabina Dewan, executive director of and senior fellow at the New Delhi-based Centre for Policy Research, told Al Jazeera.

Because they will not use their education or skills fully, “this sets us back hugely in terms of realising any portion of the demographic dividend”.

In the worst cases, people give up and exit the formal labour force altogether.

The size and diversity of the country also mean there are barriers ranging from language to geographical immobility. One key hurdle is social mobility, especially for women and those belonging to the oppressed castes.

“Although the caste system was abolished decades ago, it is somehow still entrenched and intertwined in the society,” according to Gabriele Delmonaco, executive director of A Chance In Life. The international nonprofit provides shelter, food, and education for at-risk youth around the world, including across India.

Gender disparity has not been uprooted yet either. In both urban and rural pockets, cultural barriers and safety concerns hinder women’s educational and professional development. Those who do enter the workforce constantly battle biases during recruitment and in the workplace.

Right before the pandemic, unemployment in India was at 7%, but for women, it was 18%. When Covid-19 hit, working women were already juggling their professional lives with household duties and children’s education. The abrupt changes that followed ended up forcing many to quit the workforce.

Delmonaco believes “education is the key to eradicate gender and caste inequalities”. Especially, STEM education. “Skills in technology allow young people to have access to information and knowledge for educational purposes, and eventually to join the workforce,” he said.

But the idea of tech as the great equaliser alone is too myopic a solution.

Fewer jobs

India’s urban youth remain pessimistic – perhaps, rightly so. The lack of skills training is only one of their many problems.

Bigger policy changes are the need of the hour to reform India’s jobs landscape. And the challenges are many.

For instance, we know that solutions like blind recruitment do not solve caste discrimination. But there is little evidence yet of what does. Then, we know that hiring more women means little without helpful accompanying measures like child care support or period leave, and gender sensitisation training.

What happens when even these well-meaning policies backfire? Take the move to extend maternity leave from 12 weeks to 26 weeks. An asset on the surface, some claim it has failed, with employers steering clear of female candidates to avoid any potential burden.

There is also a lot of information asymmetry – between job-seekers and employers, between educational institutes and job providers, between public and private sector stakeholders, and more.

The list is long, and both private companies and the government must clean up their act if they want to make sure one lost decade does not turn into several.

This article first appeared on Quartz.