Construction, mining sectors can help India reap demographic dividend

If youngsters can't be absorbed into workforce, there will be a volatile population of underemployed

The media has been full of reports of major information technology (IT) concerns shedding employees. It isn’t anecdotal or restricted to IT. Engineering colleges have huge problems with placements this year. A friend of mine working in the education and careers space points out, “Amongst 17 IITs, only 66 per cent of those who made themselves available for campus recruitment landed an offer in 2016-17. Of the 9,104 who applied, only 6,013 got jobs. We will have (across India) at least 2.4 million students graduating in 2017-18 with not more than 0.4 million being placed from the campuses.” 

This highlights a major economic issue, which could turn into a social issue. India has a very young population. About 50 per cent of Indians are under 25 years old. This mean that the bulk of the population has the potential to be solidly productive for decades. Even if unit productivity does not increase, the bulge in the working population will generate more GDP, and do it faster. 

Every Asian economic miracle - China, Thailand, Japan, South Korea, Hong-Kong and Indonesia, - has been built on a similar bulge in the working population. Another key factor in the case of every Asian Tiger has been the ability to deliver education and skill up the population. India has deficiencies in that regard though Indians under 25 are, by and large, literate.

India’s population characteristics could be a blessing or a curse. If the youngsters cannot be absorbed into the workforce, there will be a large volatile population of underemployed/ unemployed persons. A large population of unemployed young persons, and one that is predominantly male (due to gender ratio disparities) is likely to lead to problems on the law-and-order front. More riots, more communal incidents and more random street crime and violence are all generally associated with higher levels of unemployment. 

Employment for one million persons must be generated every month to absorb that workforce. But, India’s growth has been jobless for a very long time and continues to be jobless. Nowhere near that amount of employment has been created. 

Traditionally, manufacturing, mining and construction are three sectors, which have absorbed unskilled labour on a large-scale. India simply isn’t competitive in manufacturing. Despite initiatives like “Make in India”, India may never be competitive in manufacturing, except in a few specific domains. For what it’s worth, manufacturing is being increasingly automated and it will not be a great employment generator.

Mining and construction on the other hand, are both areas which can absorb large workforces. India has an infrastructure deficit, which means that it also has construction opportunities. India also has a wealth of natural resources and hence, potential for mining. 

India needs roads, rail networks, telecom towers, power transmission systems, container terminals, airports, power plants, metro networks, etc. This means construction. The construction industry has suffered stagnation as sundry infra projects have died, leaving huge debts. However, many key players in the construction sector have managed to deleverage balance sheets. Activity could restart in this sector if policy is reviewed sensibly. 

Mining requires much more in the way of work. The mining sector is inefficient. It is dominated by badly-run PSUs and by robber barons who flout environmental norms. Mining is also vitiated because most key regions have Left Wing insurgencies, often directed against mining operations. Multiple and far-reaching policy change would be required to rapid growth in this segment. 

Both sectors need a great deal of government cooperation, from Centre and state governments. Sensible policy action and solutions to Left Wing insurgency could revitalise them. In the absence of such policy action, India will face a demographic problem, not reap a demographic dividend.