Did we miss demographic dividend in India , because we could not bring in second generation reforms, in time?

With 65 percent of its population under the age of 35, India today has the biggest workforce in the world.  This is a powerful demographic fact. The TeamLease Indian Labor Report of 2009 estimated that 300 million people will enter the labor force by 2025, and that by then, 25 percent of the world's skilled workers will be Indians. It is very interesting to know more about the youth of India which makes a transition into the workforce.

Sensex 2011 figures reveal that about 210 million young people are in the age group of 19-27, are a  part of the young workforce in 2013. The table below shows that they total up to 17% of the entire population. About 68% of these young people stay in rural India and about 32% of these young people stay in urban india.

Young people between the age group of 19-27
Age		Rural		Urban
	Persons	Male	Female	Male	Female
19	21210681	7750696	6691291	3595172	3173522
20	27949127	10513732	9036862	4502228	3896305
21	20852240	7166514	6693278	3674211	3318237
22	28873867	10280859	9689067	4606538	4297403
23	19972115	6852501	6093438	3676088	3350088
24	23521614	8330797	7405106	4058673	3727038
25	19148106	6198591	6186799	3472574	3290142
26	19874102	6457812	6305658	3632158	3478474
27	27761906	9847406	9027654	4461056	4425790
Total	209000000	73398908	67129153	35678698	32956999
% of total population	17.30%	6.10%	5.50%	2.90%	2.70%
	In the year 2013, as per census 2011

Survey results of young employable people in Balmukundpura village in Rajasthan

In order to take a closer look at these young people in rural India, we went to village Balmukundpura in Chaksu district of Rajasthan. Balmukundpura is located at about 15 kms from Jaipur. We conducted a survey amongst the young people in the age group of 20-30 in that village. We talked to 70 young men and women residing in that village and employed in non-agricultural jobs. This village is losing its agricultural income as they are losing cultivable land. The occupational profile of these young people revealed that about 22.5 per cent were involved in sweet-making, 14.1 per cent were working as construction labor, 9.9% as construction worker. The rests were painters, sculptors, tailors, drivers, electricians and those who engage in animal husbandary. About 2.8% of the youth in the village were unemployed.

The educational profile of these young people revealed that only 3 of them had completed their school education up till 12th grade, the rest of them were school dropouts. About 22.2 per cent had studied until the 7th grade, 19.4 per cent had studied till the 9th grade and about 19.5 per cent were educated till 5th grade.

When asked about their present income we found that most of them were earning below Rs. 10000 a month, which they considered as insufficient to fulfill their basic needs (70.4%). Most of these young people felt that there were poor job opportunities in their area and no career growth.

We asked them about their dream job. About 70% of these young  people felt that they just wanted a job which could give them a higher income but they did not have any idea about what they wanted to do. 22.5 per cent of the people wanted to continue with their family occupation. Only 5 people could reveal a dream job of getting some office work, the work of a teacher and tailor.

About a preference for a place of work, about 40.8 per cent of the youth answered that they wanted to work in a big city, 32.4 per cent were interested in working in their own area and 26.8 per cent had no problem in working anywhere.

Where do they see themselves 10 years from now? The most common answer to this question was - no idea. After prodding, some of them said that they would be doing the same work then too. When they were asked what skills they needed to learn in order to reach their goal about 49.3 per cent of them considered better education as an important factor to reach their goals, 40 per cent considered both skills and education were equally important. About 10 per cent of them believed that they did not require any learning of any better skill or education to reach their goal.

Most of those young people who had no idea or had never thought about, what they would be doing 10 years later, considered better education important for them to reach their goals. When asked whether they would find themselves in a different job ten years hence, about 46 respondents said that they would be doing the same work or something better in the same profession; One respondent wanted to do some small scale business and believeded more education as an important factor to achieve it. Nine people wanted to do service 10 years later and they considered better education as an important factor to move ahead in life.

When asked about what kind of job opportunities were available in their area, only 2 people believed that there were good jobs, while the rest believed that there were poor job opportunities. These two people were a driver and a sweet-maker earning a good enough income as compared to others.

When asked about the quality of education provided in the schools in and around their village, about  74.6 per cent of the youth thought that the education provided at their school was good, 21.1 per cent thought that it was average and 4.2 per cent considered it very good. There was no one who considered it as poor.

What would be their desired income 10 years later?Their answer was interesting. They wanted to earn between and Rs. 15,000 per month (28.2 per cent) to  Rs. 20,000 per month (29.6 per cent), Rs. 25,000 (18.3 per cent) and Rs. 10000 (9.9 per cent). There was just 1.4% who said they wanted to earn Rs. 2,00,000.

Most of the young people (42.3 per cent) wanted to continue with the same occupation as they were not aware of what else they could do with their present skill and education.

This study brought home some very interesting facts. The services sector led growth envisaged in the country in the last decade is perceived by the rural youth of India as an opportunity, they could have taken too, had they received higher education. But they have very little idea about what kind of education they could have sought, if they had an opportunity. All those who are school dropouts had a feeling that they had already missed the bus, they did not have too much of an opportunity to grow.

Most of these young people do not plan for their future. A permanent job in some office is a dream job with many as it would promise a consistent income. They currently have temporary jobs with inconsistent incomes, and they have a feeling that they are likely to live like that in the years to come.

They thrive on the subsistence economy. They are not ambitious. They do not see an opportunity to grow, an opportunity to seek an employment which would bring them higher incomes. They have no idea about what skills they should seek, to get an employment. Demographic bulge prepares a potential employee, but he is someone who does not seem to find an employment opportunity for himself.

They want to grow. But they do not have an answer to the question - How to grow?

We looked at the skill development activities done by the Government of Rajasthan and found that SDI(Skill development initiative) scheme for skill development was enforced in Rajasthan. The funds released under Skill development initiative (SDI) scheme in 2007-2012 for Rajasthan were Rs. 129 lakhs. During 2008-09, the funds released were around 1 lakh and only 27 beneficiaries were covered under this. In the next year, it increased a little bit. The total funds released during 2008-12 were 5.73 lakhs and only 81 beneficiaries were covered.The amount of funds released and the beneficiaries covered were very less during the years 2008-2012 as compared to population of the state which needs to be covered as is implicit from the survey which was done.  

This brings us to an astounding fact. Neither the government nor the employable youth has any kind of clarity about where employment opportunities can be created for these young people and what kind of skill development would be required for that.

Is that the demographic dividend, we are talking about?

Possibly the situation in developed states like Gujarat, Andhra Pradesh, Karnataka, Tamil Nadu and Kerala is slightly better in terms of job opportunities available or a clearer vision of the youth regarding the skill development or career growth, but the situation is likely to be the same as Rajasthan in the less developed, more populated states like Bihar, Madhya Pradesh,  Uttar Pradesh and Orrisa.

Where is the hidden unemployment?

68th Round Survey by the National Sample Survey Office ( NSSO), puts forward the following findings - The unemployment rate per 1,000 population is at 27, while it was 25 two years ago. As on January 1, 2010, the number of unemployed was 9.8 million. By January 1, 2012, it has increased to 10.8 million.

In rural areas, the unemployment rate for both male and female is almost at the same level, 2%. But, in, urban areas, women are more unemployed than men. The rate is 5% for women and 2% for men. India has witnessed a work force (activity status determined on the basis of reference period of one year) growth of 13.9 million in just two years, between 2010 and 2012.

The current workforce at the all-India level is 47.2 crore. More than half the population (52%) is self-employed, while 18% work as regular wage/salaried employees and 30% as casual laborers. More people are self-employed (56%) and work as casual laborers (35%) in rural India. In Urban India, it is the waged/salaried (43%) who constitute a majority. They are followed by the self-employed (42%) and casual laborers (15%).

In India, women are more self-employed than men. The share of self-employment in total workforce is 55 % for rural men, 59 % for rural women, while it is 42 % for urban men and 43 % for urban women. Men work more as casual labourers.

Nearly half the population (49%) is engaged in agriculture, while 24% are working in secondary sector and 27% in tertiary sector.

When we look at the statistics for the unemployment and compare it with the primary survey done at Balmukundpura, we can easily imagine and understand, where the hidden unemployment  resides.

Nearly half the population is engaged in agriculture, and a majority of these people are self-employed and work as casual laborers. It isn’t education or any kind of formal skill development that is required for these people to remain employed in their occupation, which is agriculture.

Those who are not employed in agriculture, have a temporary employment, they are either casual labourers or are service providers. According to a study published in economist, “. About 85% of India’s jobs are with “informal” enterprises—those organisations with fewer than ten staff which are not incorporated. Another 11% are casual jobs are with formal companies. Only 16% of Indians say they get a regular wage. People with informal jobs are usually very poor. An official study of 2004-05 data concludes that 80% of informal workers got less than the then national minimum wage of $1.46 a day." There are some good jobs. But India’s IT firms, for example, account for only a few million jobs out of a total of half a billion. We have an army of guards, peons, delivery boys, car-dewaxers and men who sit on stools in lifts pressing the buttons.

If we look at the statistics for the workforce at all-India level we find that as per the NSS 66 ^thround survey, as on January 2010, the workforce at the all-India level, was about 459 million (rural men - 231.9, rural women - 104.5 ; urban men - 99.8 million and urban women - 22.8 million) . As on January 2012 (present survey), it has increased to 472.9 millions (rural men - 234.6, rural women - 101.8 million; urban men -- 109.2 million and urban women - 27.3 million). Clearly there has been an increase in the workforce in the urban areas, while there has been a decrease in the workforce of women in the rural areas. About 60% of the rural women are self employed. This decrease in the workforce indicates an important phenomenon. As workforce migrates from rural areas to urban areas, women who could remain self-employed in rural areas find it difficult to remain employed in the urban areas. The unemployment rate is 5% for women and 2% for men in urban areas.

If we look at the statistics for the contribution of various sectors to GDP, after 1990-91, when the reforms began, we find that the share of manufacturing and other industry in GDP has remained the same over a period of two decades. The share of agriculture has come down by almost 10% and the share of services has increased by almost 20%.

Year	Agri-culture & Allied Services -Share to Total GDP	Agriculture - Share to Total GDP	Industry - Share to Total GDP	Mining and Quarrying - Share to Total GDP	Manufacturing - Share to Total GDP	Services - Share to Total GDP
1990-91	29.53	24.94	27.63	3.48	15.08	42.55
2005-06	18.27	15.46	27.99	2.65	15.34	53.74
2006-07	17.37	14.69	28.65	2.60	16.00	53.98
2007-08	16.81	14.29	28.74	2.46	16.14	54.45
2008-09	15.77	13.36	28.13	2.36	15.78	56.11
2009-10	14.64	12.35	28.27	2.30	16.17	57.09
2010-11	14.45	12.29	28.23	2.21	16.23	57.32
2011-12	14.10	12.02	27.51	2.06	15.70	58.39

About 27% of the population is employed in tertiary sector. About 73% percent of the population is employed in agriculture and secondary sectors.

No wonder the youth of Balmukundpura thinks that it would be education which would land them in better jobs and better source of earning. 

This brings us to five important issues –

1.      13.9 million people got added to the workforce in just two years as per the NSSO data , between 2010 and 2012. 65% of the population in India is under the age of 35, which indicates at a huge demographic dividend, but the fact is – more and more young people are actually joining the less productive workforce in the country, in terms of GDP growth, which is in the agriculture and the secondary sector.

2.      A huge migration of workforce is happening and is likely to happen in the years to come in the urban areas where the youth will seek job opportunities.

3.      We are not likely to create jobs for these young people in the industry and manufacturing sectors in the years to come.

4.      The present statistics indicate that there is no big challenge of skill development present for the youth of India. In fact, the youth is likely to join conventional jobs for which no new skills are required.

5.      If 27% of the population contributes to about 60% of the GDP, it’s a clear indication that the rich are getting richer and the poor are getting poorer.

Some disturbing facts

There is a huge competition coming from countries like Bangladesh, Philippines, Vietnam, Indonesia and Cambodia, for the outsourced, off-shore work centers. Labour intensive industry in India, like textiles has lost a large amount of its world exports to china.

According to an article published in Newsweek(‘The Unemployable masses’), “ India is rising fast as a tech power and turning out 280,000 engineers a year. But according to various analysts, as few as one in 25 is ready for international competition.”

According to an article published in Economist, “Economists have long identified arcane labour laws as the key to India’s manufacturing problem. Scholars have gleefully dissected India’s 51 central and 170 state labour statutes, some of which pre-date independence, to demonstrate how they make it hard for firms with more than a handful of staff to fire people and allow disputes to become legal endurance tests. Studies have shown how tighter rules impede growth in labour-intensive industries and prompt firms to remain small.” Big firms can bypass labour laws by appointing contract workers and paying them lesser wages. The average wage of a contract labourer is $5-6 per working day, a quarter of what a permanent labour gets. The minimum wage in Guangzhou, a Chinese industrial hub, is $10.5 per working day. Indian Business Houses like Tatas are more keen on expanding to global locations rather than building factories at home.

NREGA guarantees work for the rural poor, and subsidies for the needy. According to a report to the people on NREGA IN 2013, from FY 2006-07 upto FY2012-12 (upto            Dec, 12) over Rs. 1,29,000 crore has been spent on wages. This is almost 70% of the total expenditure. Rs.1,29,000 crore rupees are spent to push the rural poor back to the subsistence economy. It is imperative that subsidies given to poor in the form of welfare schemes run by the government, withdraws the money that could easily be spent on infrastructure.

These are some disturbing facts, which indicate that demographic bulge will not be converted to demographic dividend. In a nutshell, the youth of Balmukundpura, which will join the workforce in the coming years is not likely to have better job opportunities.

Did we miss the bus because we could bring the second generation reforms in time?

If we had brought the second generation reforms as early as 2001, which would mean Bankruptcy Laws and Labour reforms, Land acquisition act, easy infrastructure finance, increasing the banking net, by bringing in more financial sector reforms, probably we could have seen a boom in the industrial sector in the last decade.

The expenditure on welfare schemes has its own opportunity cost. The amount of money that was spent on NREGA could have given us a huge network of roads, better ports, more electricity and water. I will make a separate blog post on this topic.

Had we brought the reforms in time, some ten years back? What could have happened?

We could have had mid scale manufacturing units producing textile, toys, stationary, footwear, pharma products, electronics, cosmetics, toiletries, agro products, spare parts etc. coming up in tier two cities, responding to a huge domestic demand and a substantial export opportunity. There are several labour intensive businesses, which could have generated employment in the two tier cities. India could have had its own Chinese alternative, for domestic consumption as well as for exports. We could have competed better with countries like Bangladesh, Philippines, Vietnam, Indonesia and Cambodia.

This proposition gives us an idea of a demand led economic growth model, where higher disposable incomes resulting from the changes in the world demographic patterns, giving rise to labour exports for serving the ageing population in the rest of the world. A domestic demand for goods and services as a result of rising disposable incomes would have resulted in the expansion of existing markets and creation of new markets, fuelling the economic growth rate.

 A lot of blue collar jobs could have been created in the process, primarily in the secondary sector, and it would have shifted the workforce from the less productive jobs to the more productive jobs, in terms of GDP growth. The government could have created demand by investing in infrastructure sector, roads, ports, electricity, water and land development. Better infrastructural facilities could have given a boom to manufacturing sector. The burden on agricultural sector for employing the youth of this country could have become less.

If we had these Mid-Scale units producing labour intensive products in the SEZ in Jaipur, the youth of Balmukund pura (which is currently engaged in temporary jobs in the village) could have easily migrated to Jaipur to look for an employment opportunity. There could have been an on the job skill development and it could have given rise to disposable incomes at Balmukundpura. The electrician, tailor, sweet maker plumber, carpenter, left behind in the village could also have seen their businesses grow. Most importantly, the youth could have had an opportunity to plan a future for themselves, if they could have had an answer to a How to Grow? 

Where do we engage this huge workforce to reap the benefit of demographic dividend?

If we look at the population pyramid, we find that developed countries with a hexagonal age structure are slowly moving into trapezoid or inverted pyramid-shaped structures. India is moving into a hexagonal structure. What does that imply? In terms of age structure we are moving into that stage where a bigger chunk of young population will continue to contribute more and more to the GDP and resultantly they will demand better returns. The disposable income of these young people would increase and they would demand better lifestyles.

Dr. Vaidhyanathan of IIM Bangalore in a article written for the hindu business line says, “Already, we find that the remittances by the labour of developing countries at more than $70 billion is higher than the net private capital flows from the developing to the developed countries at around $65 billion. This is primarily flow from blue colour workers from West Asia, the US, and Europe to other parts of the world. This will undergo an interesting shift, since by the process of outsourcing, the labour will not move, only the work will move.”  We can think of getting some blue collar jobs from the western world to countries like India, in the form of outsourcing done to offshore work-centers located in countries like India.

What policy steps can be taken to reap the benefits of hexagonal demography?

Imminent labour reforms. We need to place outsourced off-shore work centers closer to villages. A formidable model of industrial growth, developed in United States based on investment in large scale heavy industry may not be the right model for us to adopt. Chinese model of shifting labour from villages to mainland china to work in state developed labour intensive industry, may not be a feasible model for us. Over-due reliance on small scale industry to develop on its own has been a major failure in the license raj days.

We need to develop a hybrid model. We have to provide infrastructural facilities, easy finance, low taxes and improved labour laws to entrepreneurs to develop mid-scale labour intensive enterprises in and around tier two and tier three cities. The business that is going to countries like Indonesia and Vietnam should be brought to these places. We created SEZs to provide that, but there has been a limited success with them. We need to do this with a revolutionary Zeal.

We need to create infrastructure facilities in those tier two and tier three cities which are surrounded by villages like Balmukundpura, where people are losing employment opportunities in agriculture. We have to look for those places to establish SEZs where labour could easily migrate to nearby cities, without having to bring about a complete rehabilitation. We need to construct roads, railway tracks as a link to these villages, fast trains and buses which could bring the labour to the cities. There should be a strategic placement of SEZs, a good amount of planning should go into the development of infrastructural facilities in and around SEZs.  Tax holidays could be given to mid-scale labour intensive manufacturing units established in SEZs

Land Acquisition Law

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2013, passed by Parliament during the Monsoon Session of the parliament needs to be enacted. There have been many agitations around the country by farmers for not paying a fair price for the land acquired from them for industrial set ups. Gujarat is no exception in that.

We have to think about alternate employment for these farmers as well. Prof Vaidyanathan in his article writes, “Large areas of land are needed to create these offshore centres and already farmers on the outskirts of Bangalore have held agitations seeking "fair price" for their land. One possibility is to treat their land as an equity investment and provide them long-term benefits in the form of share in profits. be established. Time has come for agencies such as Nasscom to ponder over these issues.”

Financial Reforms

Mr. Raghuram, in his very first announcement showed a commitment to bring about the second generation financial reforms, which would mean expansion of banking net and adoption of advanced risk management practices. Large proportion of India’s households are out of banking net, particularly in rural areas. We need further penetration of the banking system. Financial inclusion is important not just to channelize more savings into the financial system but also for extending credit in semi urban and rural areas to encourage entrepreneurship. Reduction in the cost of banking services, enhancing the risk assessment and risk management capacities in order to maintain credit quality would be important steps to be taken to sustain credit growth in these areas.

Banking system is highly computerized. Huge investments in technology, should be translated into better MIS through decision support systems and yield returns on investment by providing economical, affordable and customized customer centric banking solutions.

Large Scale investment in core sector

Reflecting pick up in industrial activity, the core sector industries recorded 8 per cent growth in September, highest in the past 11 months. The eight infrastructure industries namely coal, natural gas, petroleum refinery products, fertilizer, cement, crude oil, steel and electricity , grew mainly due to expansion in the production of the last three industries. As per the assessment of the Planning Commission, during the Twelfth Plan (2012-17) India may need infrastructure investments of over US$ 1trillion. This would be a huge investment target. The infrastructure gap in India, in relation to its own growing demand and in comparison to other countries in competition like China, has been a key factor affecting the overall productivity of investments. The requirement of high initial capital outlay, necessitates measures to address the financing constraint to capacity expansion in infrastructure.

Infrastructure investment needs to be funded by both public and private sectors. We need to develop some commercially viable models for infrastructure investments. Fiscal consolidation and reorientation of expenditure towards capital expenditure is required to meet the target. We have to attract FDI investment in this sector. We have to understand that we need FDI more than they need us.

Ministry for Rehabilitation and Migration

We did not have a proper rehabilitation policy in India, inspite of the fact that we envisaged a big challenge of rehabilitation, as infrastructure growth picked up. The national rehabilitation and resettlement policy,2007 states, “ Provision of public facilities or infrastructure often requires the exercise of legal powers by the state under the principle of eminent domain for acquisition of private property, leading to involuntary displacement of people, depriving them of their land, livelihood and shelter; restricting their access to traditional resource base, and uprooting them from their socio-cultural environment. These have traumatic, psychological and socio-cultural consequences on the affected population which call for protecting their rights, in particular of the weaker sections of the society including members of the Scheduled Castes, Scheduled Tribes, marginal farmers and women." 

Involuntary displacement of people may be caused by other factors also. There would be a huge rural urban migration also. There have been many agitations in the past. The recent example is of farmer’s agitation in Gujrat, at Sanand, Bhavnagar and Nandsen. In order to ease out the process of transfer of land and rehabilitation of land owners, land acquisition act and rehabilitation policy is not enough. The problem would be a mammoth problem and we could have a Ministry for Rehabilitation and Migration, to take appropriate administrative action. The ministry should ask for budget allocations to take up the task of rehabilitation in an official way.

We need to be committed to policy change and work with a revolutionary zeal, so that the youth of Balmukundpura converts the demographic bulge into a demographic dividend. If we do not do this, there is a possibility that the youth of Balmukundpura might go to the highway, stop a car and engage in robbery, as a first step towards a self-developed answer for How to Grow? The policy makers need to understand that the state needs to provide them with an answer.





** The views expressed in this blog are the views of the author and do not reflect that of the organisation she works for.