India today stands at the crossroads of history. With over 65% of its population below the age of 35, the nation possesses one of the youngest workforces in the world — a demographic advantage that many ageing economies would envy. This so-called demographic dividend offers India a once-in-a-century opportunity to accelerate growth, innovation, and productivity. Yet, as the Business Standard editorial rightly warns, the dividend could morph into a demographic burden if the country fails to translate youthful energy into productive employment.
Learning from Asia’s Transitions
Historically, nations that harnessed their demographic window — such as South Korea, Singapore, and China — invested heavily in education, urban infrastructure, and labour flexibility. In contrast, countries in Latin America and Africa that did not create productive jobs during their demographic peak witnessed social unrest and income stagnation.
India’s own experience since the 1991 economic reforms shows that while GDP growth has been robust, employment generation has lagged. The share of manufacturing in employment has stagnated, and the shift from agriculture to industry and services — the hallmark of successful economic transitions — remains incomplete.
The Mobility and Productivity Trap
At the core of India’s employment dilemma lies three intertwined challenges:
1. Low Labour Mobility:
India’s internal migration remains limited compared to its population size. Cultural barriers, lack of housing, and non-portable social benefits prevent workers from moving to more productive regions. The absence of a unified labour market reduces allocative efficiency.
2. Low Productivity in Informal Sectors:
Nearly 85% of India’s workforce remains in informal employment, contributing disproportionately less to national income. Productivity gaps between the informal and formal sectors are wide, and without digital and skill integration, the divide may worsen.
3. Weak Sectoral Transition:
While the services sector contributes over 50% of GDP, it absorbs less than 30% of the labour force. Agriculture, still employing around 42%, contributes under 15% of GDP — a clear indicator of underemployment and disguised labour.
Education and Skills: The Missing Link
India’s education system produces millions of graduates each year, yet only a fraction are job-ready. The ASER reports have repeatedly shown basic learning deficiencies, while the Periodic Labour Force Survey (PLFS) highlights skill mismatches.
Without a comprehensive reform in vocational training, apprenticeships, and industry-academia linkages, the economy risks creating a generation that is educated but unemployable. Digital literacy, AI readiness, and green skills will define the next decade — and India cannot afford to lag behind.
Converting Potential into Power
To avoid a demographic reversal, India must pursue fundamental reforms across multiple fronts:
Labour Mobility: Implement portable social security systems, housing policies for migrant workers, and inter-state recognition of skill certifications.
Human Capital Upgradation: Reform curricula to include digital, technical, and entrepreneurial competencies.
Sectoral Strategy: Promote labour-intensive manufacturing (textiles, leather, electronics assembly) alongside modern services (healthcare, logistics, AI).
Regional Development: Encourage investment in aspirational districts to prevent urban overconcentration and ensure balanced growth.
Gender Inclusion: Increasing women’s labour participation from ~25% to even 40% could boost GDP growth by 1.5–2 percentage points annually.
The AI–Automation Dilemma
By 2035, automation and AI could displace up to 20% of current routine jobs, but could also create new opportunities in AI maintenance, data services, and green technologies. The key will be reskilling rather than resisting automation. India must align its demographic dividend with the AI dividend, leveraging its youthful population to supply the global demand for digital labour and innovation.
From Numbers to Competence
India’s demographic advantage is not a guarantee — it is a responsibility. History teaches that numbers alone do not ensure prosperity; only productive employment and institutional reform do. As the global economic map shifts toward technology and sustainability, India’s challenge will be to transform its young population from a statistical blessing into a strategic asset.
The next decade will decide whether India’s youth becomes its engine of growth — or its greatest missed opportunity.
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