''The main problem the country faces is not low GDP growth, but low employment growth.'
Key Points
- 'The students who are coming out of colleges and getting into the workforce don't have decent basic education.'
- 'When they don't have decent basic education, you can't tell them to get skills.'
- 'Youth unemployment is even higher than the average unemployment.'
In May 2026, India's unemployment rate was at an 11-month high of 5.5%.
Again in May, the labour-force participation rate (LFPR) was at an 11-month low of 54.4%.
"Do you know how many young people enter the workforce every year? Between 10 and 15 million people come into the workforce every year. But there are no jobs for them," well-known economist Dr Sudipto Mundle, Chairman, Centre for Development Studies, teslls Shobha Warrier/Rediff.
We have been hearing about ease of doing business for so long but when you talk to entrepreneurs, they say that there is no ease of doing business in India...
This is a very urgent medium term reform. It cannot be done overnight.
In the medium term, this has to be a top priority.
The other thing is on the education front.
The students who are coming out of colleges and getting into the workforce don't have decent basic education.
When they don't have decent basic education, you can't tell them to get skills.
We talk a lot about skilling but in order to pick up skills, especially in today's AI world, you need to have good basic education.
Sadly, the quality of basic education is abysmal. We think of this as a soft matter but this a central matter.
You need to fix your education system and make it effective very urgently. Otherwise, India's workforce will remain uncompetitive, unproductive and they will be left behind in global competition.
This is the other important medium to long term reform.
If we are aspiring to keep growing rapidly, and reach a developed country status by the middle of the century, this has to be our major goal.
'We've been talking about demographic dividend for 15 to 20 years. Now that window is ending'
We have been talking about India's demographic dividend with 65% of the population below the age of 35. But one third of the youth population is classified as Not in Education, Employment or Training.
Because India's fertility rate is at 1.9 below replacement level, are we going to lose this demographic dividend? Unlike China which exploited its demographic dividend.
People would say demographic dividend. But is it a demographic curse?
It all depends on what you do with the young people who are coming into the workforce.
Have they been properly educated? Are they able to get the skills to get properly employable? No, they are not.
So this so-called demographic demand has remained a theoretical dream.
In order to realise the dream, you have to make your young workforce properly employable and productive. But we didn't do that.
So that window is virtually gone. I mean, it has reached towards the latter end. And very soon, it will be completely gone.
There are differences across states. In a state like Kerala, it's already gone. It's already closed.
Whereas in our less developed and most lacking states like UP, Bihar, that window remains open. So, we still have an opportunity. But we need to get our act together.
Both central or state governments have to think of this on a war footing.
Even though it's a medium term measure, unless you start now on a war footing, medium term will also disappear, like the demographic dividend.
We've been talking about demographic dividend for 15 to 20 years. Now that window is ending.
AI is one of the reasons why unemployment is happening, especially in the IT sector. The way other countries are surging ahead in developing AI, do you think we are missing the AI race?
We started late. We often do a lot of talk, but action on the ground is very limited.
I see that our private sector is doing impressive work, I don't mean just big companies but the small startups.
A country like China is building its own AI models. It doesn't depend on any other country.
Ideally we should also do that, but we started late. Still there are some small startups in India who are doing that.
We need to have our own stacks on which we can build. Yes, there's a lot of work to be done.
The good news is that in the non-AI IT related sectors such as construction, tourism, clothes and apparel, food processing, etc which are all very labour intensive sectors, where employment is going up.
So, on the employment front, government should pay more attention to help these employment intensive sectors do well.
'Real unemployment is higher than what the official statistics says'
As an economist, are you happy with the GDP growing at 6.6%?
You know I'm a very old man now.
IMAGE: Dr Sudipto Mundle.
When we were young kids, students, the debate would be, are we going to get to 5% or not?
When the Hindu rate of growth of 2% was happening?
Yes, Now we debate whether it will be 6% or 7%?
I am not really worried about the number.
India has a sustained very high growth rates for a very long time. It rarely happens.
China is one country that had high growth rate for a very long period. We have also done it, 6% to 7% growth for a long time. This is a good thing.
I am not bothered about 1% more or 1% less.
What I'm more bothered is about the rate of growth of employment. Employment generation is not happening.
Experts say what is happening in India is jobless growth....
It's not jobless growth. Jobs are growing, but jobs are not growing at the same rate as the supply of labour is growing.
You talked about the demographic dividend. Do you know how many young people enter the workforce every year? Between 10 and 15 million people come into the workforce every year. But there are no jobs for them.
Youth unemployment is even higher than the average unemployment.
The real unemployment is higher than what the official statistics says.
The real unemployment in this country is under-employment.
A job that 5% can do, 10% are doing it. It means, it is not that 10% are employed, only 5% are properly employed.
So, the main problem the country faces is not low GDP growth, but low employment growth.
Feature Presentation: Rajesh Alva/Rediff
