Labour participation is key to the growth matrix. Goldman Sachs projects India will beat the US by 2075 to emerge as the second-largest economy, while also surpassing Japan and Germany. These projections imply that global growth will average a little under 3 per cent per year over the next ten years and will be on a gradually declining path, primarily reflecting slower labour force growth. Global population growth has halved over the past fifty years, from 2 per cent per year to less than 1 per cent, and is expected to fall to close to zero by 2075. That is where India’s chance lies.
India’s large population is clearly an opportunity. However, the challenge is productively using the labour force, by increasing the participation rate. That will mean creating opportunities for labour to get absorbed and simultaneously training and upskilling them. The labour force participation rate (LFPR) is defined as the section of the working population in the age group of 16–64 in the economy currently employed or seeking employment. People who are still undergoing studies, housewives and persons above the age of sixty-four are not counted in the labour force.
India’s current population is estimated to be a little over 1.4 billion and roughly 64 per cent of that – or about 900 million – falls in the working age cohort. Every year, however, a little over 10 million youth join the workforce. This is a matter of concern, as the LFPR in India has been around 50 per cent for a long time and the employment statistics have not improved much. In comparison, LFPR is 73 per cent in the US, 76 per cent in China and 78 per cent in the UK. Even if India were to increase its LFPR by one percentage point every year until it reaches an LFPR of 70 per cent, around 95 million non-agricultural jobs will have to be created over the next twenty-five years considering the rate at which the total population is estimated to increase, according to experts from Dun & Bradstreet International.
Let us look at female labour participation in particular. India is home to about 663 million women, of which approximately 450 million fall in the working age of 15–64 years. India’s female labour force participation rate (FLFPR) has been showing a sharp declining trend over the past three decades, from 30.2 per cent in 1990 to an all-time low of 17.5 per cent in 2018, as per reports by the World Bank, Centre for Monitoring Indian Economy (CMIE) and the Periodic Labour Force Survey (PLFS).
Unlike the downward trend, India has seen in the FLFPR since the 1990s, the 2020–21 PLFS for all ages shows a significant improvement in the past three years, going up from 17.5 per cent to 24.8 per cent (for women aged 15 and above, the rate increased from 23.3 per cent in 2017–18 to 32.8 in 2020–21). A recent press release from the Ministry of Finance highlights that this improvement can be attributed to a range of factors, including progressive labour reform measures, better employment trends in the manufacturing sector, increasing share of self-employed people, and a rise in formal employment levels.
The global FLFPR is 52.4 per cent (age 15+) and has been at a similar level for the past three decades. However, in developing countries and emerging economies, there is a significant variation. In the Middle East, North Africa and South Asia, this rate is approximately 25 per cent, whereas it reaches up to about 66 per cent in East Asia and sub-Saharan Africa. According to the PLFS, we have approximately 166 million women either working, seeking work, or available for work. Of the population of working women, more than 90 per cent work in the informal sector. They are either self-employed or casual workers, predominantly in the agricultural and construction sectors. This means they face increased exploitation, poor working conditions, lack of mobility and a higher risk of violence. This discourages women from entering the workforce. A recent NITI Aayog report states that women in India spend 9.8 times more time than men on unpaid domestic chores (against a global average of 2.6 as reported by UN Women). Globally, unpaid care work is the key reason that women are outside the labour force.
India’s ability to attract and retain talent is another issue to consider. Developed by the prestigious INSEAD, the Global Talent Competitiveness Index (GTCI) index measures how countries and cities grow, attract and retain talent. It claims to provide ‘a unique resource for decision-makers to understand the global talent competitiveness picture and develop strategies to boost their economies’. The index uses two sub-indices: input and output. Input measures regulatory and business environments, as well as steps being taken to foster talent and retain it, while output evaluates the quality of talent.
With a ranking of 103, India’s performance in the GTCI is the worst among the BRICS group of countries. China remains at the top of the group at 40, while Russia is at 52, South Africa at 68 and Brazil at 69. “In the years to 2020, India saw its talent competitiveness increase but it has regressed in each of the three years since,” notes the report. “A major reason for this fall is a slump in business sentiment, which has had a detrimental effect on the ability to ‘attract talent’ (now 132 of 134) – whether that is talent from overseas (127 in ‘external openness’ sub-pillar) or from within the country (129 in ‘internal openness’).” It also refers to “an increased skills mismatch and a greater difficulty in finding skilled employees, pushing India to 121 in both the ‘employability’ sub-pillar and the ‘vocational and technical skills’ pillar”.
The report records “global knowledge skills”, the second of the output-related pillars, as India’s best-performing area, where innovation and software development are driving its 69th position in the talent impact sub-pillar. According to the report, other emerging countries have shown improvements on this index, with China, Indonesia and Mexico being cited for special mention. “Several of the largest emerging economies are among the best improvers over the past decade. Notable examples: China has moved from being a talent mover to a talent champion; Indonesia is one of the countries with the greatest strides in talent competitiveness over the past decade; Mexico has moved from being a talent laggard to a talent mover; and Brazil has progressed and may well soon be categorised as a talent mover.”
Singapore, Switzerland and the US are among the top three countries on the scale.
Excerpted with permission from Tarmac to Towers: The India Infrastructure Story, Pratap Padode, Westland.
