India is on the cusp of a demographic dividend because it is projected to add 22% of the global workforce between 2020-50.
However, this potential can quickly turn into a liability if the country is unable to make this workforce employable.
History has many examples where demographics did not give a dividend but instead become a liability due to social unrest and productivity loss from high unemployment. For India to translate its economic growth potential into reality, it needs to be able to provide skilled workforce to the industries that have a bright future here. Instead, today, we are witness to the country facing the issue of Structural Unemployment, especially youth unemployment, remains high when industry is experiencing a shortage of skilled workers.
Let us look at the forecasts for some of the key sectors to understand this problem. The Indian AVGC sector has the potential to capture 5% of the Global AVGC market and touch US$ 40 Billion in size, more than 10X growth from its current size. However, the industry struggles to fulfill the nearly 1,60,000 jobs it generates on an annual basis today. The Beauty & Wellness industry employs almost 15 million people across India, however, the sector is largely unorganized and the workforce poorly trained. As the aspirations and standard of living of the ~750 million adult population goes up, so will the need to look and feel good.
This will ensure the demand for well-trained beauty professionals would far outstrip the low-teen sectoral growth rates. 63% of all Indian corporates are facing a dearth of IT-ready professionals. By the year 2025, corporate India would be staring at a deficit of 1.1 million IT-ready professionals.
On the other hand, the country saw unemployment of 7.83% (in April 2022) even when the Labor Force Participation Rate (LPFR) was one of the lowest at 40%, which indicates many adults have given up looking for a job.
The issue that is germane to this problem of structural unemployment is the high number of Qualified Unemployed Graduates (QUGs) and underemployed churned out by Engineering and Management colleges, Universities, etc. As an illustration, only 5.5% youth possess basic programming skills and only 2.5% engineering graduates in India are employable even when the 4-year course costs more than 1 million. This translates into a negative or an abysmal return on time and money invested in formal education. If invested in better alternatives that focus on skilling and create Skilled Employed Professionals (SEPs), even with lower investments these courses will generate better returns.
- Information & Broadcasting Ministry - Shortage of IT professionals from Talent Shortage 2020 survey by the Manpower group
- UN Department of Economic and Social Affairs – World Population Prospects
- Centre for Monitoring Indian Economy (CMIE) – Unemployment Data
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