India's demographic dividend will turn sour unless manufacturing takes off.

Even as we have been trying to reconcile with India's GDP growth rate slumping to the lowest in a decade, latest data slams us with an even worse development: industrial growth has slowed to the lowest in two decades! Many trends have been leading up to this point, from a decline in private investment and slackening exports (despite the crumpling of the Indian currency) to a deceleration in electricity output and auto sales.

It would be convenient but not at all convincing to blame global conditions. Between political timidity and regulatory logjams, India has done a 'good' job of spawning its own monsters. Joblessness is one of the biggest.

With about a million young Indians entering the job market every month, it was very disturbing to see this year's Economic Survey finding that total employment in the country grew by just 1.6% per year from 1999-2000 to 2009-10.

That was through boom years. Today we are looking at just 5% growth. Admittedly, alternative data sets don`t present as bleak a picture of 'jobless growth'. But there is no doubt that job creation wasn't very heartening even when the Indian economy was doing wonderfully, so we really have cause for great concern during the current slowdown.

For China, for South Korea, for Taiwan, for most of our more successful Asian neighbours, it was a manufacturing expansion that lifted millions of workers out of poverty and delivered growth dividends lifting entire economies into a new hemisphere.

Everyone knows what`s hampering a similar expansion here — reform of antiquated laws for labour regulation and land acquisition, corruption, slow clearance of projects and so on. India`s industrial performance now nears the lows of 1991-92, suggesting that reforms of similar magnitude as were unleashed back then are necessary.


Source : timesofindia.indiatimes.com