The Reserve Bank of India (RBI) projects India’s GDP to grow by 7.2% in FY23, which places the country among the fastest growing economies in the world. One of the reasons for the rapid growth is that India entered a demographic dividend starting 2018. 

A demographic dividend occurs when a country’s working population is larger than its dependent population. When people have fewer dependents (children and elderly parents), they tend to take more risks, travel for work, and also take up high-productivity jobs. This drives higher GDP growth. 

The ratio of India’s working population to total population is currently higher than countries like China, Japan and Brazil. The population of these countries have already started to decline, while India’s working population will increase till 2045. It will also exceed China’s population by 2030. 

While having a large labour force is an opportunity for countries, translating it into high growth is not straightforward. India has not made significant headway in skilling and educating its workforce. And almost 83% of the workforce is employed in the unorganised sector. 

Employability of India’s workforce was 47.4% in 2019. It fell to 46.2% in 2022 due to the lockdown restrictions during the COVID-19 pandemic owing to online classes, as well as long school and college closures. 

As India shifts from an agricultural nation to a manufacturing/services economy and an exporting powerhouse, policy-makers will have to focus on increasing employability, and bringing more people into the organized sector. It also needs to increase labour participation for women. India currently ranks 178 out of 187 countries in female workforce participation according to the World Bank and its female labour participation rate is 19%, among the lowest in the world.