India’s Economic Growth and Demographic Advantage

India’s Demographic Advantage
• India is the world’s fastest-growing big economy, with a median age of 28 and 63% of the population working age.
• The labour force participation rate fell to 55.2% in 2022, indicating that growth is primarily driven by the services sector.
• More steps are needed to harness the demographic dividend.
Continue with the Reforms Agenda
• The ongoing reforms agenda is crucial to maintain India’s growth trajectory.
• The Economic Survey for 2023-24 reveals a declining capital-to-output ratio and an increasing capital-to labour ratio due to technological advancements.
• The reluctance of Micro, Small and Medium Enterprises and large business houses to grow in size and scale due to compliance burden and costs imposed by outdated labour laws.
• The impasse over implementing new labour codes is a signal to investors and should be addressed by states with an evolved manufacturing ecosystem.
Addressing the Skill Shortage
• Only 4.4% of the workforce in the age cohort of 15-29 years is formally skilled.
• The dichotomy of labour surplus and skills shortage must be addressed through public-private partnerships.
• Skilling is a lifelong process requiring flexibility in institutional mechanisms and learning agility.
Impact of AI/ML
• AI/ML poses a risk to repetitive tasks with low skills, but it should be regulated and harnessed.
• India already has the second largest talent pool globally in AI/ML, but the current gap between demand and supply is projected to widen.