Majority of India's workforce has stopped looking for jobs: Report
What's the story
The problem of job creation and unemployment in India is becoming worse with an increasing number of people quitting to even look for jobs. Frustrated by the inability to find the right job, millions of Indians, especially women, are dropping out of the labor force altogether, showed a new study conducted by the Mumbai-based private research firm, Centre for Monitoring Indian Economy (CMIE).
Context
Why does this story matter?
In light of the recent report, experts warn people may not become wealthier over time. India's demographic dividend may become a liability without enough jobs or workers who are adequately prepared for those jobs, said a recent Confederation of Indian Industry (CII) report. The demographic dividend reflects the potential for economic growth. The higher it is, the higher the potential for increased productivity.
Fact
Labor participation down to 40%, 21 million women quit
Between 2017 and 2022, India's cumulative labor participation rate fell from 46% to 40%. The situation is worse among women with 21 million of them leaving jobs, keeping only 9% of the eligible population employed or searching for employment. CMIE further noted the majority of the 900 million Indian labor force—roughly the population of the United States and Russia combined—doesn't want to work now.
Quote
'India will likely remain in a middle-income trap': Economist
"The large share of discouraged workers suggests that India is unlikely to reap the dividend that its young population has to offer," said Kunal Kundu, an economist with Societe Generale GSC in Bengaluru. "India will likely remain in a middle-income trap...further fueling inequality," he added. The failure to employ young people might also move India off the path to becoming a developed country.
Information
How is unemployed young India surviving?
Unemployed Indians are mostly students or homemakers, relying on rental income, pensions from elderly family members, or government assistance. Others are simply falling behind in developing marketable skillsets due to a lack of quality training and leading to a reduction in government-sector employment despite vacancies.
Solution
India requires a GDP growth rate of 8% to 8.5%
According to a 2020 McKinsey Global Institute report, India must create 90 million new non-agricultural jobs by 2030 to keep up with a growing youth population. This requires an annual GDP growth rate of 8% to 8.5%. Meanwhile, according to the UN Population Statistics database, India will add 183 million more people in the working-age group of 15-64 years between 2020 and 2050.
Context
Reduction in labor participation predates the pandemic
India's declining labor participation pattern predates the COVID-19 pandemic—starting with the Centre's demonetization (2016) and the implementation of the goods and services tax (2017). Economists are concerned Indians may grow older but not become wealthier. Moreover, due to gender discrimination and cultural expectations, women who make up 49% of India's population contribute to only 18% of its economic productivity—less than half the global average.