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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