Growth, Employment, and Youth: Policy Implications | S N Tripathy

Significant shifts and challenges have emerged over the past decades in the dynamic landscape of India’s economic growth, employment patterns, and youth engagement. From stagnant employment growth to COVID-19-induced disruptions and the evolving nature of youth participation in the labour force, the narrative of India’s development trajectory offers insights into its economic structure and demographic dividends. This article investigates into the intertwined histories of growth, employment, and the challenges faced by the youth population in India.

Employment growth in India witnessed a remarkable transformation, with stagnation up to 2019, followed by an upward trend. During 2000-2012, employment grew sluggishly at 1.6% annually, while gross value added (GVA) surged at a much faster pace of 6.2%. This disparity intensified between 2012 and 2019, highlighting the disconnect between GVA growth and employment expansion. However, the onset of the COVID-19 pandemic sparked a substantial increase in employment, particularly in the agricultural sector, outpacing the growth in agriculture GVA.

Capital deepening and technological progress drove labour productivity, leading to a shift from low-productivity agriculture to higher-productivity non-agricultural sectors. While employment in agriculture declined steadily from 2000 to 2019, the construction and service sectors experienced significant growth. However, this transition reversed post-2019, with a resurgence in agricultural employment attributed to economic slowdowns induced by the pandemic.

The construction sector exhibited high employment elasticity, albeit dominated by low-wage and informal jobs. Despite robust GVA growth, manufacturing struggled to generate significant employment opportunities, with most jobs being regular or self-employment types. Conversely, the service sector emerged as the primary driver of India’s growth, creating productive and decent employment, especially in modern service domains like software, IT, and financial services.

India’s demographic dividend presents a double-edged sword, with a large youth population poised to contribute to economic growth. However, challenges loom large, with youth labor force participation rates remaining low, primarily due to increased participation in education. The trajectory shifted post-2019, witnessing a rise in youth Labour Force Participation Rate (LFPR) and declining unemployment rates, particularly among rural women.

Structural features of youth employment reveal vulnerabilities, with a prevalence of informal and low-quality jobs. Wage differentials persist between youth and adult employment categories, indicating subpar working conditions for the former. While youth employment in non-agricultural sectors showed promise pre-pandemic, the COVID-19 crisis disrupted this trend, leading to increased underemployment and a decline in quality jobs.

 There needs to be coordination among various stakeholders involved in skills training, resulting in fragmented efforts and duplication of resources. Third, the quality of training programs remains a concern, with many courses failing to meet industry standards or adequately prepare participants for the workforce. Fourth, there is a perception among youths that formal education is more valued by employers than vocational training, leading to a reluctance to pursue skills training programs. Finally, there is a need for more qualified trainers and assessors, limiting the scalability and effectiveness of skills training initiatives.

Active labour market policies (ALMPs) are crucial in addressing unemployment and underemployment among youths. ALMPs encompass a range of interventions aimed at improving job search skills, facilitating job matching, providing temporary employment opportunities, and supporting entrepreneurship. In India, ALMPs include schemes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which provides guaranteed wage employment to rural households, and various skill development programs administered by the government. These programs can enhance the employability of youths, particularly those from disadvantaged backgrounds, by equipping them with the necessary skills and resources to access decent employment opportunities.
However, the effectiveness of ALMPs in India is hindered by several challenges:

1 The target population lacks awareness and accessibility, with many eligible beneficiaries unaware of these programs or incapable to access them due to bureaucratic impediments or geographical constraints.

2 The implementation of ALMPs is often marred by corruption, inefficiency, and leakage, leading to poor targeting and suboptimal outcomes.

3 There needs to be more coordination and collaboration among different government departments and agencies responsible for implementing ALMPs, resulting in duplication of efforts and wastage of resources.

4 There is a need to tailor ALMPs to the specific needs and circumstances of different demographic groups and geographical regions to ensure their effectiveness and relevance.

India’s demographic dividend presents a unique economic growth and development opportunity, with a large and youthful population capable of driving productivity and innovation. However, comprehensive policy measures are essential to harness this potential fully to address the multifaceted challenges of youth employment, education, and skills development. This draft outlines a holistic policy agenda promoting inclusive and sustainable youth employment in India.

Several challenges hinder the effectiveness of skills training initiatives in India:

1 Spatial imbalances in training capacity disproportionately affect poorer regions with high demographic potential.

2 There needs to be higher levels of socio-economic inclusion in training programs, limiting access for disadvantaged groups.

3 The prevalence of informality in the labour market complicates efforts to internalize returns from training.

4 More adequate remuneration for trained individuals is needed to ensure the attractiveness of training programs.

5 Apprenticeship training enrollment needs to be higher, with a significant gap between established targets and participation.

Entrepreneurship development is crucial for generating fresh employment opportunities. Despite policy emphasis on entrepreneurship, progress in creating a supportive environment has been limited. Job search assistance programs, including digital platforms like Aatamanirbhar Skilled Employee Employer Mapping (ASEEM), have the potential to match skills supply with demand. However, they must match job offers and expectations to ensure effectiveness. Job fairs can facilitate connections between job seekers and employers, but their impact remains modest.

A comprehensive policy agenda is proposed to mitigate these challenges and promote youth employment.

We must make production and growth more employment-intensive, prioritize labor-intensive manufacturing sectors and support emerging employment-generating sectors through targeted policies.

To improve the quality of jobs, we need to invest in sectors such as the care sector and digital economy while promoting inclusive urbanization and migration policies to create decent employment opportunities.

Overcoming labour market inequalities, crafting policies to boost women’s participation in the labour market, resolving the challenges of youths not in employment, education, or training, and ensuring equitable access to education and skills training are necessary.

We must enhance the effectiveness of skills training and active labour market policies and strengthen partnerships between the government, the private sector, and other stakeholders to bridge the skills demand gap and facilitate youth employment.

We must bridge knowledge deficits on labour market patterns and youth employment and improve data collection and analysis to inform evidence-based policy formulation and monitoring.

India’s growth story intertwines with the complexities of employment dynamics and youth challenges. The narrative underlines the need for holistic policy interventions, from sluggish employment growth to sectoral transitions and demographic shifts. Balancing economic growth with inclusive employment opportunities and meeting the aspirations of the youth population is imperative for India’s sustainable development journey. As the nation directs through evolving economic landscapes and societal transitions, fostering a conducive environment for productive employment and empowering its youth remains paramount.

Resolving the challenges of youth employment, education, and skills development in India requires a multifaceted approach that combines investments in education and skills training with targeted interventions to improve labour market outcomes. Policy measures should focus on expanding access to quality education and skills training, enhancing the relevance and quality of training programs, strengthening coordination and collaboration among stakeholders, and promoting the effective implementation of ALMPs. Implementing these measures requires concerted efforts from policymakers, private sector stakeholders, and civil society to create an enabling environment for youth empowerment and prosperity. India’s demographic dividend can be harnessed through education and skill development, unleashing the potential of its youth for sustainable economic growth story, promising a prosperous future for the nation.

(Author: S N Tripahy is Former Professor of Economics, Gokhale Institute of Politics and Economics, Pune, currently at Berhampur, Odisha)