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Turning India’s Demographic Dividend Into Growth
In honor of our new “Look Forward” report on India, this week’s Daily Updates will cover different aspects of the Indian economy.
Earlier in 2023, to considerable fanfare, it was announced that India had surpassed China to become the most populous nation, with roughly 1.4 billion people. While the announcement itself was momentous, it is the age breakdown of the Indian population that has economists predicting growth for India over the next two decades. The country’s population is unusually youthful compared with China, Europe, and the US. This means that a greater percentage of India’s population will be of working age for several decades and will be supporting a comparatively small elderly population. A large working-age population provides a bigger tax base, a lower drain on the economy from entitlements, and excess workers that will keep wages modest and attract manufacturing and service sector jobs. India is confronting a future with all these built-in advantages.
“India is home to more than 600 million people aged between 18 and 35, with 65% under the age of 35,” Dharmendra Pradhan, India’s minister of education, skill development and entrepreneurship, said in a recent interview with S&P Global. “India’s demographic dividend is expected to persist at least until 2055–56 and will peak around 2041, when the share of the working-age population — 20–59 years — is expected to hit 59%.”
A recent report by Senior Economist Sophie Malin and Economics Associate Director Ashima Tyagi of S&P Global Market Intelligence looked at how India can grow the industries and sectors that will employ this massive working-age population. Currently, 30.7% of the labor force is employed in the service sector. While the service sector will remain important for the Indian economy, the country can also develop as a manufacturing center. Economies that have effectively developed their manufacturing base have depended on excess workers to keep labor costs low and attract foreign investment.
India has a large population to draw on for workers, but it has also seen historically high unemployment and muted labor force participation. The country’s national unemployment rate in 2022 was 9.3%, and its labor force participation rate was relatively low at 61.4% in 2021, versus a global average of 63.3%, according to the World Bank. India’s economic growth will depend on its ability to boost labor participation, particularly among the nation’s 691.7 million women. Just 24.0% of women worked in 2022. These numbers demonstrate a significant amount of labor market slack, meaning labor shortages that could drive up manufacturing wages in India are unlikely in the near- and medium terms.
Most Indian manufacturing jobs are low-skilled. The average Indian working in manufacturing added just $8,076 of value in 2021, versus an average of $18,308 in Thailand and $34,402 in Malaysia. India must increase skill levels and education to become a global manufacturing hub. The government of Indian Prime Minister Narendra Modi has spent the last eight years improving education and training to provide more skilled workers for manufacturing and other industries. The National Education Policy, announced in 2020, created a comprehensive framework to transform the education system by 2030.
Today is Tuesday, August 8, 2023, and here is today’s essential intelligence.
Written by Nathan Hunt.
Economy
U.S. Not-For-Profit Acute Health Care 2022 Medians: Historically Low Metrics Signify A Long Road To A New Normal
Average prices charged by factories for their goods fell worldwide for a third month in a row in July, according to the JPMorgan Global Manufacturing Purchasing Managers' Index™ (PMI™) compiled by S&P Global. However, the rate of decline moderated, as deflationary forces from falling raw material and energy costs, as well as weaker demand-pull forces, were partially countered by increasingly elevated wage pressures. The data therefore hints at some stubborn stickiness of core inflation globally.
—Read the full report from S&P Global Ratings
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Capital Markets
U.S. Community Banks Hit Rough Seas in Q2
Banks faced a liquidity crunch during the quarter amid rising Federal Reserve interest rates to quell inflation, worsened by a series of high-profile bank failures early in the year. As a result, community banks with less than $10 billion in assets posted weaker median results on a year-over-year basis in most operating metrics, according to S&P Global Market Intelligence data.
—Read the full article from S&P Global Market Intelligence
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Global Trade
US Adds 3,000 Sailors, Marines to Middle East After Tanker Threats by Iran
The U.S. Department of Defense announced the additional security and ships to the region on July 20, after an Iranian court ordered the seizure of a tanker sailing in Gulf waters which had collided with an Iranian vessel.
—Watch the video from S&P Global Commodity Insights
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Sustainability
IRA at 1: U.S. Heralds Clean Energy Manufacturing 'Renaissance'
As the first anniversary of its signing approaches, the Inflation Reduction Act has already spawned a massive effort to reestablish clean energy manufacturing in the U.S. even as the federal government is still working to finish rules for accessing the climate law's voluminous tax credits.
—Read the full article from S&P Global Market Intelligence
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Energy & Commodities
Demand for Russian Coal Drops Amid Vanishing Price Advantage
With the deep discounts receding, Russian coal seems to be losing its attractiveness since the second quarter, with many buyers finding alternative sources of the fuel and some returning to the sellers from whom they imported seaborne coal before the Ukraine-Russia conflict disrupted trade flows, an analysis by S&P Global Commodity Insights showed.
—Watch the video from S&P Global Commodity Insights
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Technology & Media
Listen: Vector Databases in AI
While it’s not often acknowledged, much of the progress in technology is underpinned by the idea that “everything old is new again” and vector databases, a concept that is many years old, are having a moment in generative AI.
—Listen and subscribe to Next in Tech, a podcast from S&P Global Market Intelligence