India should create 8 mn jobs yearly to become advanced economy: OECD
Chennai: India will have to overcome labour market challenges, including creation of 8 million non-farm jobs every year and sustain strong per capita growth to achieve its target of becoming an advanced economy by 2047, finds OECD.
The organisation finds that India has several structural challenges in its path towards achieving 'advanced economy status'.
“India aims to reach 'advanced economy status' by 2047, which requires sustaining strong per capita growth,” it said.
Labour market challenges include the need to create 8 million non-farm jobs each year to accommodate projected demographic trends and the ongoing employment shift out of agriculture. Agriculture still occupies about 45 per cent of the labour force.
Stronger performance in this area will necessitate efforts to upskill the population, given that a quarter of all adults, including many women, were classified as illiterate in 2022. Labour market regulations including those restricting dismissals and overtime rules will also have to be balanced against their impact on labour costs. A greater focus on youth employment could help to reduce the 23.5 per cent share of the youth population that is neither in employment, education or training.
In addition, strong growth will require raising female labour force participation, which is only around 35 per cent. It also needs efforts to reduce labour informality. However, India’s strong position in technology services or greater utilisation of potential female labour resources could underpin even faster growth than projected.
Sustained high economic growth will facilitate the large energy investments needed to achieve net zero greenhouse gas emissions. Rising incomes will also enhance other dimensions of well-being, including longer life expectancy at birth, which fell by four years during the pandemic, and lower poverty. Achieving the latter, however, will also need further expansion of the social safety net and pension coverage.
The main macroeconomic risks come from abroad, notably a weaker economic environment and higher commodity import prices, associated with a worsening global geopolitical environment or greater protectionism.
Domestically, financial risks associated with small retail investor exuberance and booming derivatives trading have increased.