India’s Demographic Dividend and Economic Stagnation: A Structural Crisis
A A Rahim
INDIA boasts the world's largest workforce, with 420 million young people making up 29 per cent of the population. The working-age population (15-65 years) accounts for approximately 68 per cent of the total population, a demographic advantage that began to emerge around 2005-06 and is expected to continue until 2055-56. Despite this, the Indian economy is showing signs of stagnation, with economic growth declining from 8.1 per cent to 6.4 per cent. This persistent decline in growth can be attributed to rising unemployment and inflation, both of which have severely weakened the purchasing power of the majority. Economic growth cannot be achieved without increasing the purchasing power of the vast majority of the people. The large portion of the Indian workforce lacks money to spend in the market. Young people struggle with financial stability, making it difficult to move forward in life. Many face unemployment, while those with jobs often earn inadequate salaries.
EMPLOYMENT AND WAGE CRISIS
According to the latest Economic Survey, regular salaried jobs have decreased from 22.8 per cent to 21.7 per cent. While corporate profits have surged by 22.3 per cent, wages have not witnessed a proportional increase. This admission within the Economic Survey highlights two major concerns:
1. A decline in stable, well-paying jobs.
2. Stagnant wages despite rising corporate profitability.
Young people are grappling with financial instability, facing both rising inflation and dwindling job opportunities. Inflation has reached extreme levels, with food inflation increasing from 7.5 per cent to 8.4 per cent in a single financial year, according to the Consumer Food Price Index (CFPI) and the Economic Survey Report. These trends highlight the Modi government's anti-people policies, as confirmed by the report itself.
India is becoming a nation where the cost of living is soaring, stable jobs are declining, and salaries in corporate sectors remain stagnant. As a result, many are forced to rely on loans just to survive. Yet, the latest budget offers no real solutions to address unemployment.
According to the Centre for Monitoring Indian Economy (CMIE), India's unemployment rate stood at 7.8 per cent in September 2024. However, the central government has failed to introduce any concrete measures in the budget to curb this growing crisis. In the previous budget, Finance Minister Nirmala Sitharaman proposed an internship scheme to provide opportunities for one crore educated youth, offering a stipend of ₹5,000 per month. However, the latest budget makes no mention of this much-publicised scheme, raising concerns about its implementation and effectiveness.
Lakhs of vacancies remain unfilled across various central government public sector undertakings, yet instead of addressing this urgent demand of educated youth, the government is actively cutting posts. Permanent positions are being replaced with contract appointments, and retired employees are being reappointed.
For instance, the Ministry of Railways, through an order issued on October 15, 2024, has decided to re-hire retired officers for various positions. This move comes at a time when lakhs of permanent vacancies exist in the Railways alone, including 1.7 lakh posts directly related to railway safety. As India's largest public sector undertaking and employer, the Railways' failure to recruit new talent is a betrayal of young job seekers.
The banking sector is facing a similar crisis. Between 2014 and 2024, the number of employees in public sector banks declined by 14 per cent. Instead of offering stable jobs, these banks are hiring apprentices under the guise of skill development, paying them a mere ₹12,000 to ₹15,000 per month on a one-year contract. This shift from permanent employment to contract-based hiring is turning the public sector into a system of modern slavery.
The Modi government’s policies are systematically dismantling permanent employment across sectors, including insurance and postal services. This approach not only threatens job security but also undermines reservation policies. By expanding contract and outsourcing models, the government is effectively eliminating the scope for reservations in public sector jobs, exacerbating social inequality. This deliberate strategy aligns with the Sangh Parivar's hierarchical worldview of Chatuvarna and upholding of Manusmriti, which seeks to weaken affirmative action and deepen existing disparities in Indian society.
The Economic Survey Report projects industrial growth at 6.2 per cent, a figure that economists deem unsatisfactory. After the government and the public sector, the industrial sector has the highest potential to generate employment in India. Micro, small, and medium enterprises (MSMEs) play a crucial role in job creation. However, the central government’s policies favouring large corporates are pushing MSMEs into crisis, further limiting employment opportunities creating major crisis in this sector.
NEW JOB SECTORS
IT, IT-related sectors, private banking-insurance sectors, consultancies, etc., are expanding in the country today. But is the educated workforce of the country satisfied with these institutions? Are they being exploited? Is gender justice being upheld in these workplaces? At the very least, do they receive a salary that can withstand the rising cost of living? Do they get timely salary increments?
If the central government has even the slightest sincerity towards the youth, it should address these concerns. However, the government is not willing to tackle the problems faced by the new generation of the working class.
The Economic Survey Report highlights a concerning trend – an increase in working hours. Under the new labour codes, overtime can now extend up to 144 hours per quarter. This reform, already implemented in states such as Maharashtra, Haryana, Himachal Pradesh, Odisha, Karnataka, Uttar Pradesh, and Punjab, is now being recommended for nationwide adoption. The justification? It will supposedly increase workers' earning capacity.
However, the reality is starkly different. While corporate profits in India surged by 22.3 per cent this financial year, wage rates remain stagnant. The Economic Survey itself acknowledges this stagnation, particularly in the IT sector. It is evident that the central government’s policies are designed to benefit corporations by enabling the relentless exploitation of labour.
Work-life balance remains a major issue in new job sectors, including IT. The tragic death of Anna Sebastian, an Ernakulam native working at the multinational firm Ernst & Young, due to extreme work stress, is a stark reminder of the toll excessive workloads take on employees. She is not alone – we remember the names of many such martyrs.
Instead of addressing the mental health crisis among young professionals, the central government is pushing policies that increase workloads and intensify exploitation. Overtime does not meaningfully enhance salaries; it only worsens existing mental stress.
In short, the government is not protecting workers – it is enabling modern slavery.
The sharp decline in the number of employees in public sector banks is evident, while the figures also show a significant increase in the number of employees in the private banking sector. In fact, the total number of employees in private banks now exceeds that of public sector banks. This shift reflects a change in job opportunities – once offered by public sector banks, which provided regular income and reservation in appointments –towards the private banking sector. The central government's push for Indian youth to join this competitive and often stressful sector raises concerns about the mental strain and potential exploitation they may face.
ERA OF EMIS AND CIBIL SCORES
The era of EMIs and CIBIL scores has become the new norm for the current generation. For many, taking loans has become indispensable – whether to lead a better life or, in some cases, to simply maintain a standard of living. Today’s educated youth have become prime targets for the growing number of private banks and instant loan companies. In India, where the cost of living is continually rising, many young individuals are forced to take loans when their salaries fall short. However, if they default on these loans, they become trapped by their CIBIL score, making it increasingly difficult to access credit in the future.
India has a small proportion of income tax payers. The BJP is touting the relaxation in the income tax payment limit as a major budget announcement, but what benefit does this hold for the vast majority of Indians? Currently, only about 3.5 crore individuals pay income tax, and the announced relaxation will only benefit a small fraction of them. It is crucial to recognize the large number of people struggling to meet daily expenses in the unorganized sector. The government's own e-Shram portal shows that 30.51 crore gig workers are registered.
Meanwhile, the increase in the foreign investment limit has contributed to the collapse of India’s small business sector. Highly educated youth entering the unorganised sector are facing immense financial challenges. Yet, the budget offers no provisions to protect or support them.
Claims that income tax exemptions for a small minority will increase the purchasing power of the entire middle class and boost the economy are misguided. Real economic progress will only be achieved by raising the income and purchasing power of India’s workforce, especially the youth, who make up the majority of the population.
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