India’s Demographic Dividend as a Global Public Good
Context:
India’s demographic dividend has the potential to influence global labour markets positively, addressing labour shortages while enhancing productivity worldwide. This opportunity requires strategic policies to build a globally competitive workforce.
Magnitude of India’s Demographic Dividend: India’s demographic dividend represents a vast pool of young, potential workers, significantly impacting domestic and global economies.
- India is adding 9.7 million potential workers annually through the 2020s, which can enhance global productivity.
- With a projected working-age population of 1.04 billion by 2030, India’s dependency ratio will reach its lowest point, marking an economic advantage.
- Beyond 2030, India will continue adding 4.2 million workers annually, positioning it as a major contributor to global labour markets.
- Proper utilisation of this workforce can drive growth both within India and across the globe.
Labour as a Global Common vs. Global Public Good: Recognising labour as a universally shared resource can redefine its role in global economic dynamics.
- Labour as a global common: Labour mobility can be compared to shared resources like oceans and outer space, being non-excludable but rivalrous.
- Labour as a public good: Free international mobility of labour, when coupled with skill-matching, generates positive externalities like improved productivity and enhanced welfare.
- Challenges: Legal restrictions and market pricing differentiate labour from traditional public goods.
- Treating labour as a public good can maximise welfare, provided institutional interventions are in place.
Addressing Global Labour Shortages: Labour shortages and unemployment coexist globally due to mismatches in skills and demographic shifts.
- Current shortages: The EU and Australia faced 1 million and 400,000 job vacancies, respectively, in 2023, despite unemployment rates of 5.9% and 4.1%.
- India’s opportunity: By addressing its own skill-mismatch issues, India can supply a high-skilled workforce to fill gaps in sectors like healthcare, logistics, and manufacturing in ageing economies.
- Bridging the skill divide can make India a global provider of talent, benefiting both labour-deficient economies and Indian workers.
India’s Comparative Advantage in Skilled Labour: India’s economic growth since the 1990s, driven by the services sector, has created a reservoir of skilled talent.
- India exports 4.6% of global services, showcasing its capability in Information and Communication Technology (ICT) and software services.
- With the largest pool of science, technology, engineering, and mathematics(STEM) graduates, India can address skill shortages in the Global North by supplying medium- to high-skilled workers.
- India’s skilled workforce can reduce global skill mismatches, enhancing productivity and fostering economic interdependence.
Resolving Skill-Mismatch in India: India faces internal challenges of skill mismatches, necessitating reforms in education and vocational training.
- Lack of market-relevant skills among workers highlights the need for curriculum updates and vocational programs.
- Enhancing human capital through targeted policies can ensure better employment opportunities and higher individual productivity.
- A robust training framework will not only empower workers but also prepare them for global markets, improving livelihoods and capabilities.
Benefits of Labour Globalisation: Transforming India’s labour into a globally accessible resource creates a win-win scenario for all stakeholders.
- For India:
- Generates remittances as a significant source of income.
- Reduces domestic pressure on employment, optimising productivity.
- For the World:
- Addresses ageing population crises in regions like the EU and the US.
- Resolves global labour shortages in critical industries.
- India’s strategic focus on labour globalisation ensures mutual benefits, securing its place as a global economic player.
Policy Recommendations for Leveraging Demographic Dividend: Timely interventions are critical to unlocking the full potential of India’s demographic advantage.
- Skill enhancement: Invest in vocational training, education reform, and skill-matching programs.
- Labour mobility: Facilitate legal frameworks and bilateral agreements for international worker migration.
- Human capital formation: Promote policies that organically enhance workers’ capabilities while aligning with market needs.
- Institutional support: Strengthen institutions to streamline migration and ensure ethical treatment of Indian workers abroad.
- These policies can convert India’s demographic dividend into a global asset, enhancing global productivity and welfare.
Conclusion
India’s demographic dividend represents an unparalleled opportunity to reshape global labour markets and economic patterns. By addressing skill mismatches, enhancing labour mobility, and fostering international collaboration, India can emerge as a leader in creating a global workforce, benefiting both its citizens and the world. However, swift and effective policy implementation is essential to harness this potential.
