World Bank Cautions India On Failing To Capitalize On Youthful Workforce

World Bank warns South Asia's job creation fails to keep pace with its rapid economic growth.

Why is job growth lagging in booming South Asia economies?

In an era marked by rapid economic progression, South Asia, led by India, is positioned at the forefront of global growth rates. The World Bank projects an unprecedented growth trajectory for the region, forecasting an expansion of 6% in 2024 and a slight increase to 6.1% in 2025. Despite this optimistic economic outlook, a concerning trend emerges—a declining employment ratio indicating a failure to generate sufficient employment opportunities for the burgeoning youth population. This discrepancy signals a potential misstep in leveraging the demographic dividend, a critical component for sustained development and prosperity in the region.

A Crucial Juncture For Employment

With India's population reaching a staggering 1.4 billion in the last fiscal year and surpassing China as the most populous nation, expectations were high for economic and employment growth. However, the actualization of these aspirations appears bleak, with the World Bank highlighting a reduction in the employment ratio across South Asia to 59%, considerably lower than the 70% average in other emerging markets. This trend is alarming, notably for working-age men, whose employment rates have diminished over the past two decades, a unique phenomenon to South Asia according to the World Bank's analysis.

Young people want to work, but there are not enough jobs. (Photo: Emmanuel Nalli)

Sectoral Stagnation And Gender Disparities

The underdevelopment of key sectors such as manufacturing and services has been identified as a significant factor behind the inadequate absorption of labor transitioning from agriculture. This sectoral stagnation compounds the employment crisis, particularly affecting female workforce participation, which remains alarmingly low. The region, and especially India, records some of the lowest female employment ratios globally, further exacerbating the challenge of fully harnessing the demographic dividend for economic advancement and social cohesion.

Political Dimensions And The Path Forward

Amidst escalating concerns over joblessness, particularly among the youth, political narratives are shaping around employment—or the lack thereof—in India. The issue has ignited political debates, with the opposition leveraging it against Prime Minister Narendra Modi's administration as the general election looms. Despite governmental efforts to stimulate job creation through infrastructural investments and policy reforms, critics argue that more substantive measures are required to enhance trade, streamline business regulations, and improve land access for private enterprises.

Regional Perspectives And Developmental Aspirations

While India battles these employment challenges, its neighbors chart their paths to growth, with Bangladesh poised as the region's second-fastest growing economy. Conversely, Pakistan grapples with its own set of economic hurdles, eyeing recovery from a contraction. The overarching narrative within South Asia remains one of balancing economic growth with equitable employment expansion, a balancing act critical to achieving the ambitious developmental milestones set by countries like India and Bangladesh for the mid-21st century.

As South Asia stands at the crossroads of unprecedented economic opportunity and significant employment challenges, the World Bank's cautionary stance invites a moment of introspection for policymakers. The region's ability to navigate this complex landscape will undoubtedly influence its developmental trajectory and its role on the global economic stage.

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