By Ms.Yi Wang
India faces immense pressure to increase employment and eliminate poverty domestically, and the policies introduced during Prime Minister Modi’s third term are expected to be “not too radical”.
According to United Nations estimates for 2023, India’s population has surpassed 1.42 billion, making it the most populous country in the world. More than 40% of the population is under 25 years old, and two-thirds of Indians were born after the economic liberalization in the early 1990s. Each year, India adds about 7-8 million new young workers to its labor force, and as journalist Amitabh Tiwari noted, these individuals require “jobs not only in terms of quantity but also in terms of quality”.
Unemployment, as a significant issue in Indian elections, will be a major challenge for the new government. Data released by the Centre for Monitoring Indian Economy (CMIE) shows that India’s unemployment rate reached 9.2% in June 2024, up from 8.5% in the same month last year. The India Employment Report 2024 published by the International Labour Organization (ILO) and the Institute of Human Development (IHD) notes that nearly 83% of the unemployed labor force in India are young people. Among unemployed youth, the proportion with secondary or higher education has increased from 35.2% in 2000 to 65.7% in 2022, nearly doubling. This indicates a pressing need for India to address issues related to insufficient youth employment and skill development.
Women’s economic empowerment has also become a hotly discussed social topic in recent years. With economic development and the digital transformation of society, Indian women are spending less time on childbearing and child-rearing, and there is an increased willingness among women of working age to pursue career development, along with a rise in flexible employment. In 2023, India’s female labor participation rate reached 37% (compared to 60.5% for women in China), an increase of 4.2 percentage points from the previous year. Oded Galor, the founder of the Unified Growth Theory and an economist at Brown University, emphasizes that “since the dawn of the Industrial Revolution, every instance of economic progress – the crux of which is sustained productivity growth – has been associated with investments in human capital and higher female workforce participation”.
In the past, India’s economic growth primarily relied on the expansion of the service sector, making it a major exporter of software engineers and financial professionals. However, the employment opportunities provided by the service sector were limited, and were unable to absorb a large amount of work force, which hindered the rapid acceleration of India’s economy. To achieve the goal of a “Developed India” more quickly, the Modi government has prioritized the development of the manufacturing sector.
According to a recent report by the NITI Aayog, India should target USD 500 billion in electronics manufacturing by the fiscal year 2029-30 (FY30). The government public policy think tank also projects that this goal will lead to the creation of 5.5 million to 6 million direct jobs in the country by the end of that fiscal year.
That being said, India’s industrial base is relatively weak, and in key manufacturing areas such as electricals, electronics, and specialty steels, there is a shortage of qualified skilled personnel. This necessitates the recruitment of high-quality technical experts from abroad to drive the upgrade of the country’s manufacturing industry. According to media reports, in 2019, India issued around 200,000 visas to Chinese citizens; by 2024, this number had dropped sharply to 2,000. Due to the tense relations between India and China, the Indian electronics manufacturing sector has suffered losses of up to USD 15 billion over the past four years, with up to 100,000 jobs lost. In July this year, an Indian official stated that the government is considering policy adjustments (PLI Scheme) to expedite visa issuance for Chinese technical personnel. This indicates that the Indian government must balance its policy shift carefully, ensuring that efforts of “de-sinicization” do not stifle India’s economic progress and neglect the livelihoods of its people.
Under the influence of geopolitical forces, global industrial clusters are undergoing significant shifts, global capital flows are changing, and the international division of labor continues to adjust. The Asian economy is increasingly leading global development in more areas. For emerging industrialized Asian countries, exporting to Europe and the United States is not the only path. With increasing national wealth, technological advancements, urbanization, and rising per capita income in Asia, regional consumption demand is growing rapidly in areas such as finance, education, tourism, healthcare, and elder care. Asian enterprises will play a more dominant role in these sectors. China and India, as the two major global economies and developing countries should actively contribute to providing solutions, driving industrial integration within Asia, and creating a positive cycle in the supply chain.
Future economic policy design in India should focus on diversity and promote a sustainable, inclusive, and equitable society. The recommendations below are with the hope that the business communities of India and China can enhance cooperation to expand the space for equitable development by leveraging their respective resources.
1、The Critical Need for India-China Collaboration in Skills Education
Basic education has historically provided numerous entry-level jobs and assembly line workers for the manufacturing sector. However, global technological innovation is increasingly driving rapid adjustments in industrial sectors. In the development process of manufacturing, characteristics such as intelligence, digitization, and network technologies are becoming prominent. Consequently, the labor market is changing, and there is a rising demand from employers for new and high-skilled talent. A university diploma does not necessarily translate into economic value in the market and does not ensure lifelong skills and career qualifications. Therefore, India’s manufacturing sector needs context-specific policies, addressing the most urgent needs and advancing overall progress from the ground up.
India’s policy-making must address two key areas: first, resolving the issues faced by current unemployed individuals; and second, enhancing foresight by improving the weaknesses in skills education and vocational training systems to adapt to emerging industries and future societal development. Both the government and businesses should continually invest in human capital. Long-term improvements in national employment and income levels are crucial, with skill development being especially important to prevent the accumulation of employment issues that could lead to social crises.
In his book Migration and Culture, American economist and social theorist Thomas Sowell points out that different ethnic groups, nations, regions, or civilizations have demonstrated a simple fact: skills are never distributed uniformly or randomly. This phenomenon may be due to cultural differences or the influence of individuals in the workplace. The skill endowments of each ethnicity play a crucial role in the evolution of human civilization and history at different times and places.
India needs to build a robust domestic technology workforce by creating an open skill ecosystem that strongly supports the enhancement of its manufacturing capabilities from an institutional level. Chinese engineers and technicians can cooperate with their Indian counterparts by assisting Indian companies in increasing productivity, not only within specific industries but also by teaching workers how to install, operate, and maintain machinery, or through technology transfer. When Indian technical institutions, universities, research organizations, business associations, and local communities organize skill education and training programs or provide career counseling opportunities, they can consider hiring and encouraging more Chinese technical talent to participate, fostering the exchange of applied knowledge and practical experience.
The overall enhancement of labor skills and the release of talent potential are closely linked to future economic and social prosperity. As such, India and China will need to expand their collaboration in skills education.
2. India Needs to Effectively Promote Sustainable Agricultural Practices
According to the latest economic survey report released by the Indian government, over 45% of India’s labor force (nearly 565 million people) is employed in agriculture. However, the contribution of the agricultural sector to India’s GDP is less than one-fifth, indicating a severe mismatch between economic output and labor input in Indian agriculture.
Agricultural production is particularly vulnerable to climate change and risk events. As the severity of climate change increases, the planting progress in major global agricultural producers has slowed, leading to significant crop failures. In recent years, many regions in India have experienced high temperatures, with heatwaves occurring more frequently than before. Several cities have had to contend with severe issues such as floods and droughts, resulting in a decline in crop yields. The Russia-Ukraine war and disruptions in Red Sea shipping are also threatening global food stocks and trade. These adverse impacts, combined with the “threat multipliers” such as the vulnerability of global supply chains, have heightened food security risks and driven up food prices. Both developed and developing countries continue to face inflationary pressures.
Industrialization is not the only path for India’s economy to maintain appropriate growth rates, and there is no need for it to replicate China’s model. As the world’s second-largest producer and net exporter of wheat and rice, India influences global agricultural markets. The agricultural sector is not only the primary source of livelihood for nearly half of India’s population but also bears significant responsibility for ensuring food security. The importance of Indian agriculture in the political arena is self-evident.
India’s agricultural policy needs more thoughtful consideration and should actively promote green and sustainable agriculture to facilitate a comprehensive upgrade of the agricultural system. Strengthening multilateral cooperation, including with China, is essential. Lessons should be learned from different agricultural practices. Emphasis should be placed on agricultural productivity services, such as crop innovation research, agricultural machinery automation, improving risk management in crop production, and enhancing agricultural price elasticity. At the same time, India will need its agricultural commodities exchanges to enhance their global competitiveness, so as to protect domestic agricultural products, and shield against severe fluctuations in the international market.
The agricultural sector not only impacts the welfare improvement of India’s vast number of farmers and the gradual enhancement of the quality of life for its citizens, but also holds the potential to create more high-tech job opportunities for ordinary Indians, meeting the expectations of the well-educated new generation of young workers.
- Indian Industrial Organizations Play a Crucial Role in Attracting Foreign Investment
The Indian government is formulating various policies to guide foreign investment into the country and vigorously promote domestic industry upgrading. However, the complexity of Indian politics and legal systems, along with cultural differences continue to cause concerns for foreign investors, adding to the hidden costs of business operations.
Industry organizations can address the deficiencies in public services and market supply and play a role in improving the business environment. Typically, these organizations understand the needs of businesses and the workforce. They serve as bridges for equitable dialogue, free discussion, and broad consultation, aiming to minimize labor conflicts, balance the interests of various stakeholders, promote responsible business practices, enhance employment, and strengthen international cooperation.
Chinese enterprises and other foreign investors are currently underrepresented in Indian industry organizations, lacking institutionalized and regular channels for participating in policy dialogue and exchanges. Industry associations and chambers of commerce in India should expand their membership base to include more businesses and make their voices heard in policy formulation, implementation, and evaluation. From the perspective of aligning social development with industrial demands, Indian policymakers should be willing to listen to industry organizations and consider the scientific evidence, viewpoints, reform plans, and policy recommendations they provide. Collective consultation and exchange of opinions can boost the confidence of foreign investors in investing in India.
The new Indian government needs to seize the opportunity to shape a new economy, inspire the next generation, and accelerate the realization of the “Atmanirbhar Bharat” (Self-Reliant India) vision. Comparisons between India and China will be ongoing, but the cooperation and interactions between the two countries remain essential and will mutually benefit each other.
About the author:
Ms.Yi Wang, is the Head of Global Development Program and Senior Researcher at the Beijing-based ANBOUND Think Tank.
