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Walking the line between demographic dividend and disaster

May 5, 2014

 Abstract: The relatively high growth rate of India’s working age population is a demographic dividend, provided a sufficient number of productive jobs are created. However, India’s historical record in this respect is poor, and the future could possibly become a demographic disaster because of three challenges, namely: (i) All technological innovations are labour-saving; (ii) Given the entrenched offshoring trend, jobs will move towards locations with the lowest costs; (iii) Worker’s know-how is becoming obsolete quickly as skill life cycle is persistently shortening.

To address these challenges, three policy imperatives have been identified:

  • India must become world’s lowest-cost producer in several sectors. Macro-stability and quality infrastructure are necessary for this.
  • Public funding is required for job creation.
  • Flexibility of the informal sector, its strength, should be combined with the productivity gains from efficient scales and organization. Ease of labour movement, skill upgradation and a safety net to deal with temporary unemployment are components of this imperative.

Keywords: demographic transition; job growth; technological change; obsolescence of skills; offshoring; informal sector; internal mobility; formal sector; labour productivity; education; infrastructure; job security regulations

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