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India Confronts Demographic Bulge of Young People -- WSJ

23 Jan 2018 7:32 am
By Niharika Mandhana 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 23, 2018).

NEW DELHI -- India's biggest economic asset is fast turning into its most daunting challenge: hundreds of millions of young people.

Two-thirds of India's 1.2 billion people are below 35 years of age. That's more than two times the total U.S. population. Unlike Japan, China and Europe, whose working-age populations have peaked, India's is growing and is estimated to become the world's largest. But the world's second-most-populous country is struggling to tap this demographic dividend.

Some policy makers and analysts say India risks missing an opportunity to grow into an economic powerhouse like other Asian countries before it.

"There's a fog around how India will tackle the youth bulge," says Dharmakirti Joshi, chief economist at the India-based credit-rating firm Crisil. "The scale is unprecedented, and India's not moving fast enough."

Prime Minister Narendra Modi's most high-profile policies promise to rev up manufacturing and train vast numbers of citizens -- most of whom have low-productivity farm jobs or no regular employment -- to work in factories, offices, stores and restaurants. These steps, however, are facing major hurdles.

A $1.8 billion skills initiative, for instance, was designed to turn high-school dropouts into an army of 10 million electricians, welders, retail salespeople, electronics repairmen and others. But only a small proportion of candidates have obtained jobs. Mr. Modi fired the minister in charge of the program, and his government is creating a new regulatory body to oversee the quality of training. A senior official says the initiative has a new focus on training people based on the jobs available in their vicinity, in an effort to better match skills with employment opportunities.

At the heart of Mr. Modi's challenge lies a basic question: Can India succeed China as the world's next manufacturing hub? China catapulted into the economic big leagues by mobilizing its large labor force and inexpensively manufacturing everything from clothes to mobile phones for global markets. Now, some analysts see an opportunity in China's wake. A 2016 report by Deloitte argued that rising wages in China open up space for India to follow the Chinese model.

Mr. Modi sees this labor-intensive path as ideally suited to absorb India's massive low-skilled population. But his "Make in India" push hasn't taken off. Although his government has made some headway in simplifying tax codes and reducing red tape that made it cumbersome for businesses to obtain various approvals, industrialization continues to be hobbled by poor infrastructure and demanding labor laws. Manufacturing makes up just 17% of India's economic output, and much of that comes from small businesses, not sophisticated, export-oriented operations that could employ huge numbers of young people.

As a result, India is losing out to competitors. Global orders for low-cost clothes and shoes are moving from China to Bangladesh and Vietnam, the Indian government's economic survey warned in 2017, adding that "the window of opportunity is narrowing."

To make matters worse, some economists say the path China took to economic growth may no longer be open to developing countries, as automation chips away at manpower needs. "The China playbook of export-led manufacturing is not going to work, so India will have to come up with a different way forward," says Shailesh Kumar, an India expert at the Eurasia Group, a New York-based consultancy. He says India may have to rely in part on a boom in housing and infrastructure building.

Mr. Modi doesn't have a lot of time to work all of this out. Each year, 12 million people enter the job market. Agriculture still dominates employment. A majority of those leaving the farm end up as daily-wage construction laborers or work in the country's informal economy in jobs like security guard, streetside mechanic or grocery vendor -- not as full-time workers in large factories or companies. A government policy-research institution noted that "those in the workforce are employed, but they are overwhelmingly stuck in low-productivity, low-wage jobs."

If the jobs are a problem, so is the workforce. Villages and towns are filled with young people who have no more than a middle-school or high-school education.

Shortly after taking office in 2014, Mr. Modi created a new skills ministry. Thousands of private-sector training centers sprung up offering courses in areas ranging from plumbing and forklift operating to customer care and beauty-salon treatments. The government picks up the tab for every citizen these centers teach.

At a New Delhi facility, 22-year-old Sunil Gautam, a former rickshaw driver, was recently learning about electrical circuits. He hoped the two-month course would land him a job at an auto-parts company. Others were being taught about wine glasses and champagne flutes for restaurant jobs.

"Until a few years ago, skills was on nobody's agenda," says R.C.M. Reddy, who leads the institute that offers these classes, IL&FS Education. "The ecosystem that has long existed in other countries is getting started."

The social network LinkedIn is targeting what it calls urban blue-collar workers as its next frontier for growth in India. The network is reaching out to candidates in training to bring them onto its platform.

But Mr. Modi's program is struggling. The courses are so short and basic that many candidates end up in low-paying jobs they don't want. Persuading them to migrate to urban or industrial areas -- a pathway China used -- is proving difficult. Officials and trainers say most young people prefer to stay in agriculture and pick up occasional work in construction while relying on social-welfare programs to help them get by.

Mr. Modi's government is pivoting to a new approach: training candidates for jobs in their districts that don't require migration. In nonindustrial areas, that could mean positions in automobile showrooms, mobile-phone stores and fast-food restaurants. Trainees also are being encouraged to establish small businesses, like beauty salons. But it remains to be seen whether any of this will be enough to change India's employment picture.

Saurabh Kumar, 23, used to work on his family's wheat farm. After a short training course, he left his village for a $135-a-month job at a call center in a nearby city. He returned in two months because his mother fell ill, he says, and never went back. Mr. Kumar now works at a local mobile-phone store for $107 a month. He doesn't plan to stick with it.

"What's the point of this job that pays so little? What next?" says Mr. Kumar. "I guess I'll just return to farming."

Ms. Mandhana is a Wall Street Journal reporter in New Delhi. She can be reached at niharika.mandhana@wsj.com.

(END) Dow Jones Newswires

January 23, 2018 02:32 ET (07:32 GMT)

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