- India is likely to become the world’s most populous nation this year.
- It presents an enormous opportunity for the country’s economic growth.
- But it is provided India can harness the potential of its large workforce, analysts say.
“The country will enjoy an abundant supply of labor and, consequently, should invite even more investments from foreign firms looking to cash-in on India’s growing manufacturing capabilities,” says Raghvendra Nath, managing director of Mumbai-based Ladderup Wealth Management.
With a population of more than 1.4 billion, India is expected to surpass China in the coming months. S&P Global forecasts that the South Asian country will overtake Germany and Japan to become the world’s third-largest economy by 2030, with annual nominal gross domestic product growth projected to average 6.3 per cent. Although India is feeling the heat from the global economic slowdown, its GDP is projected by the country’s statistics ministry to grow by 7 per cent in the current financial year to the end of March, making it one of the world’s fastest-growing economies.
Its population in a consumer-driven economy and having what is known as its “demographic dividend” — a large number of young people — will be a major factor in driving its expansion. The median age in India is 28.4 years, according to the Worldometer. That compares to 38.3 years in the US, 38.4 years in China, and 40.5 years in the UK. “For India, the main advantage of the young working-age population is that young people adapt fast and can keep pace with the continuing dramatic and constant technological change,” says Vidya Mahambare, professor of economics at the Great Lakes Institute of Management in Chennai.
A Great Opportunity
It’s “a great growth opportunity for various companies, and especially, for value-driven companies like ours” says Saket Gaurav, chairman and managing director of Indian electronics and home appliances brand Elista. But there is still much work to be done to ensure that India can fully reap the rewards of its large population. Jobs need to be created for the millions of Indians who are joining the workforce each year — and youth need to have the right skills to fill those roles. The fact that unemployment is on the rise in India is a red flag. Unemployment rose to 8.30 per cent in December, which was its highest level in 16 months, according to data from think tank Centre for Monitoring Indian Economy.
Prime minister Narendra Modi’s government is making efforts to expand the country’s economy and create jobs, for example, through its flagship scheme Make in India, which aims to transform the county into a manufacturing center. At the same time, the government’s Skill India initiative is focused on ensuring that youth are better equipped to meet the needs of companies through measures such as training and partnerships with countries including Japan to co-operate on skill development initiatives. Only 5 per cent of India’s workforce is formally skilled, despite it being the largest and youngest in the world, according to the World Economic Forum.
India’s wealth inequality is a clear challenge and is a situation that could be exacerbated as the country’s population continues to grow. In the financial capital of Mumbai, high-rise luxury flats and expensive restaurants sit alongside slums, with families of some 10 people often crammed into rickety, single-room homes. Wealth inequality has grown in India in recent decades, and the top 10 percent of the population hold more than 60 per cent of the country’s total wealth, figures from the World Inequality Database show.
“One of the biggest drawbacks of having a growing population is its negative impact on the per capita income and its growth,” says Mr Nath. However, overall, the large population is an enormous opportunity for businesses like Ezeepay, which is focused on rural areas of India, where the majority of the country’s citizens still live, he adds. The anticipated population bulge has produced a demographic dividend, providing an unprecedented chance for economic development.
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