India’s job creation problem is becoming more of a threat: a growing number of people are no longer even looking for work.
Frustrated at not being able to find the right kind of work, millions of Indians, particularly women, are leaving the workforce altogether, according to new data from the Center for Monitoring Indian Economy Pvt, a private research firm in Mumbai.
With India betting on young workers to fuel growth in one of the world’s fastest-expanding economies, the latest figures bode ominously. Between 2017 and 2022, the overall labor participation rate fell from 46% to 40%. Among women, the data is even stronger. Around 21 million disappeared from the workforce, leaving only 9% of the eligible population employed or looking for work.
Now, more than half of the 900 million Indians of legal working age, roughly the population of the US and Russia combined, do not want a job, according to the CMIE.
“The large proportion of discouraged workers suggests that India is unlikely to reap the dividends its young population has to offer,” said Kunal Kundu, an economist at Societe Generale GSC Pvt in Bangalore. “India is likely to remain in a middle-income trap, with the K-shaped growth path further fueling inequality.”
India’s challenges around job creation are well documented. With around two-thirds of the population between the ages of 15 and 64, the competition for anything beyond menial work is fierce. Stable government jobs routinely attract millions of applications, and getting into top engineering schools is practically a dice game.
Although Prime Minister Narendra Modi has prioritized jobs, pressing India to strive for “amrit kaal,” or a golden age of growth, his administration has made limited progress in solving impossible demographic math. To keep pace with the rise in youth, India needs to create at least 90 million new non-agricultural jobs by 2030, according to a 2020 report from the McKinsey Global Institute. That would require annual GDP growth of 8% to 8.5%.
“I am dependent on others for every penny,” said Shivani Thakur, 25, who recently left a hotel job because the hours were so irregular.
Not putting young people to work could put India off the path to developed country status.
Although the nation has made great strides in liberalizing its economy, attracting the likes of Apple Inc. and Amazon.com Inc, India’s dependency ratio will begin to rise soon. Economists worry that the country may miss out on reaping a demographic dividend. In other words, Indians can get old, but not get rich.
A decline in work predates the pandemic. In 2016, after the government banned most banknotes in an attempt to crack down on black money, the economy failed. The implementation of a nationwide sales tax around the same time posed another challenge. India has struggled to adjust to the transition from an informal economy to a formal economy.
Explanations for the drop in labor force participation vary. Unemployed Indians are usually students or housewives. Many of them survive on rental income, pensions from older household members, or government transfers. In a world of rapid technological change, others are simply falling behind in marketable skills.
For women, the reasons sometimes relate to security or time-consuming responsibilities at home. Although they make up 49% of India’s population, women contribute only 18% of its economic output, roughly half the world average.
“Women are not joining the workforce in large numbers because jobs are often not kind to them,” said CMIE’s Mahesh Vyas. “For example, men are willing to change trains to get to work. Women are less likely to be willing to do that. This is happening on a very large scale.”
The government has tried to address the problem, including announcing plans to raise the minimum age of marriage for women to 21. That could improve labor force participation by freeing up women to pursue higher education and careers, according to a recent State Bank of India report.
Changing cultural expectations is perhaps the hardest part.
After graduating from university, Thakur began working as a mehndi artist, earning a monthly salary of about 20,000 rupees ($260) by applying henna to the hands of guests at a five-star hotel in the city of Agra.
But due to late work schedule, her parents asked her to quit this year. Now they are planning to marry her. A life of financial independence, she said, is fading.
“The future is being ruined in front of my eyes,” said Thakur. “I have tried everything to convince my parents, but nothing works.”