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As India celebrates World Youth Day today, I reflect on how the youth of India need jobs and not jails. Why I chose this specific phrase is due to two statistics that portray the grim reality for the youth of the country. First, youth unemployment is at an all time of high of 28%, which means that close one in three of those under 30 are unemployed. Second, statistics show that crimes committed by this segment of India’s population stand at almost half of all crimes recorded over the last year. So, what do these two factoids mean? One, India, with its huge youth population (nearly 50% of India’s recorded population are under 30) is failing them by not creating enough jobs and that a correlation exists between youth unemployment and the increase in the crime rate. Indeed, it is pretty much clear that we, instead of capitalizing on the Demographic Dividend, are instead, experiencing a “nightmare”.
In the heydays of India’s growth period of the late 1990s and the 2000s and also into the last decade, much was made of this Demographic Dividend placing the country at an advantage over the “ageing” West and more importantly, against China as well, as its draconian One Child Policy, has resulted in a Demographic Decline. It is another matter that China reversed this policy and is now encouraging its citizens to have more kids. In India, the Demographic Dividend was driving the surge in incomes and wealth in the post liberalization period, wherein the services sector boomed mainly due to the ability to absorb as many young people as possible, thereby creating a “virtuous loop” where as demand for personnel led to more jobs being created and with this absorption rate increasing, more Indian IT (Information Technology) firms ramped up hiring and scaled their operations.
However, over the last decade or so, there has been a noticeable drop in the creation of jobs for the youth, though the services sector continues to hire at higher rates. Of course, the pandemic has taken its toll on the employment rates and the youth unemployment too surged as a result. Moreover, the IT firms have plateaued their hiring, relative to the rates at which they were creating jobs earlier, mainly due to the rise of anti immigrant rhetoric in the West, that forced Indian IT firms to hire locally. In addition, as the Indian IT sector moved up the value chain and also automated much of the labor intensive back end and low value adding work, they also retrenched staff in large numbers. Another factor that contributed to the youth unemployment is the lack of adequate job creation in the manufacturing space, exacerbated by the lackluster performance of the MSME (Micro, Small, and Medium Enterprises) segment.
I remember how Western economists and their Indian counterparts waxing eloquent about India’s Demographic Dividend during the 2000s, as the country, by virtue of having the world’s largest youth population, could overtake China as globalization would lead to more jobs outsourced by the West, and India, with its ability to absorb this demand, could outpace China within a decade or so. Another reason touted for this prediction was that India would “leapfrog” into an modern services based economy, bypassing the need for an Industrialization of the country, which was contrasted with China, that transitioned from an agrarian to an industrial power, and then began to focus on the services sector. The contention was that India need not rue the fact that it did not have a humongous manufacturing sector, in contrast to its neighbor to the East.
However, what transpired was entirely different as the lack of skilled human resources hampered India’s transition to a high value economy. There is a long list of IT titans who bemoaned the fact that while there was a huge pool of youth aspiring for jobs, the employability aspect meant that there were not that many who could be hired. In addition, the informal economy, that constitutes a major part of the overall economy, could not absorb the unskilled and the low skilled workers. While statistics pertaining to the informal sector are hard to come by, it undeniable that both the MSMEs and the other small scale units and establishments too could not create enough jobs. So, this puts paid to the assertion that India could actualize a “quantum leap” from agrarian to services sector, highlighting the importance of manufacturing as a key source of job creation. Worse, the agriculture sector too did not rise to the occasion, dependent as it is on rainfall patterns and the skewed distribution against small farmers.
Now, what this means is that India has a problem of youth unemployment that it has to grapple with and find solutions, that otherwise can spark social unrest. While statistics pertaining to youth crime pretty much tell the story, there is enough anecdotal evidence that the youth unemployment is indeed leading to a lethal cocktail of crime and violence, as deprivation among unemployed youth leads them astray and towards easy money and anti social activities. Moreover, with the migration of more and more rural youth to the cities, largely as a result of the agriculture sector unable to create enough livelihoods for them, urban crime rates have shot up as well. In essence, India is sitting on a “ticking time bomb” that can explode anytime as youth unemployment reaches new highs. What India’s youth need are jobs, and not jails!!
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