India’s Youth Unemployment

India’s Youth Unemployment

News: As the fastest-growing large economy in the world, India’s high growth has attracted headlines. But, with nearly a quarter of the youth being unemployed, India’s youth unemployment has also attracted attention.

What is Unemployment?
• Unemployment is a situation when a person actively searches for a job and is unable to find work. Unemployment indicates the health of the economy.
• According to the latest annual Periodic Labour Force Survey (PLFS), released by the National Statistical Office (NSO), India’s unemployment rate in July 2021-22 was 4.1%.

What are reasons for High unemployment in India despite good economic growth rate?
• India’s growth and unemployment coexist due to imbalanced policies that create fewer jobs for new labour force entrants.
• Over 50% of India’s population is below 25, and over 65% is below 35. Despite high growth, job creation hasn’t kept pace with this demographic.
• India’s progress in physical infrastructure hasn’t been matched in education and skills. The absence of strong human infrastructure limits job growth. For example, India has the largest concentration of illiterate people in the world. More than one-third of India’s adult population remains illiterate, and less than 20 per cent have completed secondary education.
• While we are witnessing shift to rural manufacturing, Poor physical and human infrastructure in rural areas hinders growth drivers and limits the size of the manufacturing sector.

What is Human Infrastructure?
• The author advocates for investing in Human infrastructure. Returns to investment in education are much higher than the returns to investment in physical investment.
• Human infrastructure refers to the development and investment in the education, skills, and capabilities of a population. It encompasses efforts to improve literacy, vocational training, healthcare, and other factors that enhance the human capital and productivity of a society.

What is importance of investing in Human infrastructure?
• Education investment yields higher returns than physical investment. Social returns for primary education are around 20%, and returns for higher education are increasing.
• Education investments accelerate job creation. New enterprises, both domestic and foreign, seek skilled workers and strong physical infrastructure.
• India’s sizable youth population can significantly benefit from education, aligning with the needs of new enterprises.

Key recommendations as given by the author:
• The focus of economic growth should shift to Tier II cities, where new job opportunities and GDP growth can be generated.
• Policymakers need to consider rural structural transformation that includes not only agricultural productivity but also the manufacturing sector.
• Address lop-sided development policies.