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World Bank’s-South Asia Development Update

Context

  • The World Bank forecasted a robust 6.0-6.1% economic growth for the region in 2024-25 in its “Jobs for Resilience” update.
  • Additionally, it cautioned that South Asia, including India, is not capitalising on its demographic dividend due to job creation lagging behind working-age population growth.

Employment Growth in India’s Case

  • India’s employment growth has fallen below the working-age population increase between 2000-2023.
  • Consequently, India’s employment ratio has declined the most in South Asia (except Nepal) until 2022.
  • Preliminary data shows a partial recovery with a 3% point rebound in employment ratio in 2023.
  • Despite the job market struggles, India’s economy is expected to grow at a robust 7.5% in FY23/24.

Regional Impact and Potential of Growth

  • Contribution to Regional Growth: India’s growth, along with recoveries in Sri Lanka and Pakistan, is a key driver of the region’s strong performance.
  • Output Growth Potential: The World Bank estimates a 16% higher output growth for the region if the employment rate of the working-age population matched that of other Emerging Markets and Developing Economies (EMDEs).

Cause of Weak Employment and Recommendations

  • Missed Opportunities: The region’s failure to capitalise on its demographic dividend is seen as a significant missed opportunity.
  • Sector-Specific Trends: Weak employment trends are notably pronounced in non-agricultural sectors, attributed to institutional and economic challenges.
  • Recommendations for Job Growth:
    • Enhance women’s participation in the economy.
    • Increase openness to trade.
    • Improve education to support job creation.

Demographic Dividend

  • The demographic dividend refers to the economic growth potential resulting from changes in a country’s population age structure.
  • Specifically, it occurs when the proportion of the working-age population (15 to 64 years) is higher than the non-working age group (below 14 years and above 65 years).
  • Key points about demographic dividend:
    • Potential for Economic Gains: A high proportion of working-age individuals indicates that more people can be productive and contribute to economic growth.
    • Demographic Transition: This occurs during the shift from a rural agrarian economy (with high fertility rates) to an urban industrialised economy (with low fertility and mortality rates).
    • Requirements for Success: To fully realise this dividend, the younger population must have access to quality education, adequate nutrition, and healthcare, including sexual and reproductive health.
  • Opportunities for India:
    • India has the youngest workforce globally, with a median age lower than China and other developed countries.
    • During the demographic dividend period, personal savings grow, leading to greater purchasing power and potential economic growth.

Jobless Growth

  • Jobless growth occurs when an economy produces more goods and services without a simultaneous increase in employment opportunities.
  • Trends in India:
    • India witnessed jobless growth during the 12th five-year plan (2012-2017).
    • Despite economic growth, the labour force expanded faster than employment.
    • Factors contributing to jobless growth:
      • Service-Centric Growth: The services sector (knowledge-intensive) drove growth, while the labour-intensive manufacturing sector lagged.
      • Formal vs. Informal Jobs: Formal job creation was limited, reducing the inclusion of informal workers.
    • Unemployment rates rose steadily, emphasising the need for job creation strategies.

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