INTRODUCTION:
Once upon a time in India, population explosion was treated as a very serious issue. Governments made serious efforts to curtail the population growth. In fact, it is said that the family planning scheme was something that was pushed as forcibly as that of other things like media censorship, during the emergency days. It was said that, over population will lead to unemployment and poverty, forming a vicious cycle.
Once upon a time in India, population explosion was treated as a very serious issue. Governments made serious efforts to curtail the population growth. In fact, it is said that the family planning scheme was something that was pushed as forcibly as that of other things like media censorship, during the emergency days. It was said that, over population will lead to unemployment and poverty, forming a vicious cycle.
THE PROPOSED DIVIDEND:
These things seem to have changed after the opening up of the Indian economy in 1991. The perceptions started to change as the foreign investments picked up. IT, ITES and BPO revolution has played a major role in bringing in confidence in this 1.3 billion people nation. Above all these things, there is one significant factor that made the globe watch out for the Emperor on Exile, which is the DEMOGRAPHY of India.
In the miasma of global economic slowdown, India continues to be a bright spot, and the credit for that should also go to the Demography. While many countries are aging, approximately half of the population of India belongs to the age group BELOW 26 years and it is forecast to be the youngest country in the world with a median age of 29, by 2020. Reports say that, 20% of the world’s working-age population will live in India by 2025. A huge group of population of a country shifting into the working age category ultimately means an increase in productivity of the country and shoot up of disposable income. This increases the purchasing power of the people and consumptions, on the whole, in an economy. Thus an increased production coupled with increased consumption will take the economy to the next level in the global radar. The main problem faced by aging developed economies is that the government is burdened to take care of its aged population by the social security schemes. That’s the reason why India’s consumer spending has touched $1trillion.
These things seem to have changed after the opening up of the Indian economy in 1991. The perceptions started to change as the foreign investments picked up. IT, ITES and BPO revolution has played a major role in bringing in confidence in this 1.3 billion people nation. Above all these things, there is one significant factor that made the globe watch out for the Emperor on Exile, which is the DEMOGRAPHY of India.
In the miasma of global economic slowdown, India continues to be a bright spot, and the credit for that should also go to the Demography. While many countries are aging, approximately half of the population of India belongs to the age group BELOW 26 years and it is forecast to be the youngest country in the world with a median age of 29, by 2020. Reports say that, 20% of the world’s working-age population will live in India by 2025. A huge group of population of a country shifting into the working age category ultimately means an increase in productivity of the country and shoot up of disposable income. This increases the purchasing power of the people and consumptions, on the whole, in an economy. Thus an increased production coupled with increased consumption will take the economy to the next level in the global radar. The main problem faced by aging developed economies is that the government is burdened to take care of its aged population by the social security schemes. That’s the reason why India’s consumer spending has touched $1trillion.
THE PROBABLE DISASTER:
Any coin has two sides. Similarly, this demographic factor also has a flip side. Reports say that, almost one million new people enter the job market every month. This huge chunk of people should be rightly employed. If they are unemployed or under employed, the result will be disastrous. If the government is not able meet the supply of labour by creating enough jobs, the result will be high levels of unemployment, which will give ample space for the feared vicious cycle of poverty. Unemployment will bring down the consumption, at least in the bottom of the pyramid. Due to a global slowdown, India is heavily dependent on its domestic consumption. So, even a small impact in its consumptions will worsen the economy further.
In reality, survey by the labour bureau showed that India has never created so few jobs since the survey started in 2009, as in 2015. Only 1.35 lakh jobs has been created compared to more than 9 lakhs in 2011, in eight labour intensive industries surveyed. Addressing this issue, The President said that Indian economy should generate 115 million non-farm jobs over the next decade.
Meanwhile, India has posted a current account deficit of $300 million for almost 2 consecutive quarters now, lowest levels in 37 quarters (which was actually expected to be a surplus ). Though this is a good news, there is a warning signal attached to it. For a developing economy like India, this slow import growth reflects weak investment demand as Indian firms import most of their capital goods.
Any coin has two sides. Similarly, this demographic factor also has a flip side. Reports say that, almost one million new people enter the job market every month. This huge chunk of people should be rightly employed. If they are unemployed or under employed, the result will be disastrous. If the government is not able meet the supply of labour by creating enough jobs, the result will be high levels of unemployment, which will give ample space for the feared vicious cycle of poverty. Unemployment will bring down the consumption, at least in the bottom of the pyramid. Due to a global slowdown, India is heavily dependent on its domestic consumption. So, even a small impact in its consumptions will worsen the economy further.
In reality, survey by the labour bureau showed that India has never created so few jobs since the survey started in 2009, as in 2015. Only 1.35 lakh jobs has been created compared to more than 9 lakhs in 2011, in eight labour intensive industries surveyed. Addressing this issue, The President said that Indian economy should generate 115 million non-farm jobs over the next decade.
Meanwhile, India has posted a current account deficit of $300 million for almost 2 consecutive quarters now, lowest levels in 37 quarters (which was actually expected to be a surplus ). Though this is a good news, there is a warning signal attached to it. For a developing economy like India, this slow import growth reflects weak investment demand as Indian firms import most of their capital goods.
REAPING THE DIVIDEND:
Rate cuts, nowadays, has become the most controversial topic with political shades to it. But, in a situation like this and as the fuel prices and inflation are down, it is better to go for rate cuts and promote capital expenditures. Rate cuts will obviously lead to inflation but the effect could be mitigated by flushing more supplies into the economy and acting strictly on hoarders. Inflation control is very much important for any economy but considering the risk involved, job creation should be given more priority in case of our economy. Rate cuts with a target of 6% inflation is something that should be worked on.
The uniqueness of our economy is that, organized sector is still a weak employer as it is projected that the proportion of jobs in the unorganized sector is set to rise to 93% in 2017. So, any plans to develop Indian economy should rightly understand and address the unorganized sectors, effectively. SMEs employ about 40% of the work force of the country. Unlike in many western countries, in India, to address the employment issue, the governments should address the financing of the Small, Medium and Micro industries with more priority than the organised sectors. On the other hand, a study reveals that approximately 95% of the SME units are yet to be brought under the banking fold. That means they are financed by private lenders, where interest rates are as high as 2-3% per month. So more effort is needed to pass on the fruits of rate cuts and cheap capital to the SMEs. When that is achieved, job creation will take a boost in the bottom levels and it will also promote entrepreneurship among the people.
Rate cuts, nowadays, has become the most controversial topic with political shades to it. But, in a situation like this and as the fuel prices and inflation are down, it is better to go for rate cuts and promote capital expenditures. Rate cuts will obviously lead to inflation but the effect could be mitigated by flushing more supplies into the economy and acting strictly on hoarders. Inflation control is very much important for any economy but considering the risk involved, job creation should be given more priority in case of our economy. Rate cuts with a target of 6% inflation is something that should be worked on.
The uniqueness of our economy is that, organized sector is still a weak employer as it is projected that the proportion of jobs in the unorganized sector is set to rise to 93% in 2017. So, any plans to develop Indian economy should rightly understand and address the unorganized sectors, effectively. SMEs employ about 40% of the work force of the country. Unlike in many western countries, in India, to address the employment issue, the governments should address the financing of the Small, Medium and Micro industries with more priority than the organised sectors. On the other hand, a study reveals that approximately 95% of the SME units are yet to be brought under the banking fold. That means they are financed by private lenders, where interest rates are as high as 2-3% per month. So more effort is needed to pass on the fruits of rate cuts and cheap capital to the SMEs. When that is achieved, job creation will take a boost in the bottom levels and it will also promote entrepreneurship among the people.
CONCLUSION:
The writing on the wall is pretty clear. India has an advantage in the form of its demography, the fruits of which can be enjoyed if the job creation picks up. My view is that, making the capital available at cheaper costs to the MSMEs will address this issue as it will act as a catalyst in the process of creating more jobs and entrepreneurs as well. Let us expect the emperor in exile will make a comeback and attain the throne very soon.
The writing on the wall is pretty clear. India has an advantage in the form of its demography, the fruits of which can be enjoyed if the job creation picks up. My view is that, making the capital available at cheaper costs to the MSMEs will address this issue as it will act as a catalyst in the process of creating more jobs and entrepreneurs as well. Let us expect the emperor in exile will make a comeback and attain the throne very soon.
