We Need an Action Plan to Deploy India’s Demographic Advantage.
By Viral Acharya
Media coverage of my Brookings report, India @75: Replete with Contradictions, Brimming with Opportunities, Saddled with Challenges, has mostly focused on India’s rising industrial concentration. I am glad a debate on this important issue has taken off. Here, I wish to put forward another set of issues that received less attention. These relate to educating our children better, skilling our youth for better-quality jobs, and restoring the female labour force participation rate.
Why are these issues central to India’s macroeconomic outlook? They affect our ability to achieve potential output without incurring inflationary pressures. Formally available statistics on listed-company wage growth appear in double digits, far in excess of the inflation rate. As some analysts observe, this wage spiral is puzzling, given the increasing slack in our overall employment.
Effectively, India’s ‘Phillips curve’—a relationship showing that when the level of unemployment is high, the rate of inflation is lower—seems to have moved up and/or steepened. This reflects a lack of adequate skilled labour for the formal sector, which is outperforming the informal sector, as well as a lack of adequate upgrading of labour skills to take advantage of prospects in the formal sector. Due to this mismatch, India is creating too few jobs relative to the size of its labour force.
Read the full Mint article.
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Viral Acharya is the C.V. Starr Professor of Economics