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India and its neighbors are not creating enough jobs to feed their young populations, the World Bank has warned, jeopardizing the region's demographic dividend even though it has the world's fastest economic growth.
The bank said it expects the economy of South Asia, which includes Pakistan, Bangladesh and Sri Lanka, to grow faster than any other region over the next two years, at 6 percent in 2024 and 6.1 percent in 2025.
India, which overtook China last year to become the world's most populous country with 1.4 billion people, is expected to have grown 7.5 percent in the fiscal year to March, up from 7 percent a year earlier.
However, the World Bank said the region's employment rate, or the share of the working-age population in jobs, was falling, a sign that countries are failing to create enough jobs for their young, growing populations.
“It’s a missed opportunity,” Franziska Ohnsorge, the World Bank’s chief economist for South Asia, told the Financial Times. “It’s almost like the demographic dividend is being wasted.”
The employment rate in South Asia was 59 percent last year, compared to 70 percent in other emerging markets. It added that South Asia was “the only region where the share of working-age men in the workforce has declined over the past two decades.”
Ohnsorge said private companies in sectors such as manufacturing and services have not grown sufficiently to absorb workers leaving the agricultural sector.
Another challenge is the lack of jobs for women. Female employment rates in many South Asian countries, including India, are among the lowest in the world at less than 40 percent.
“A job is so much more than just income,” Ohnsorge said. “At a macroeconomic level, job creation is also about social cohesion.”
The problem of unemployment is particularly thorny in India as the country struggles to create enough jobs despite its rapid economic growth. According to the think tank Center for Monitoring Indian Economy, the youth unemployment rate was 45.4 percent in 2023.
Prime Minister Narendra Modi's opponents have sought to make unemployment a political issue ahead of general elections starting this month. The rival Congress party on Sunday accused the government of trying to “cover up” this.
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Modi's government argues that it has taken important steps to create jobs, including reforms to boost manufacturing and major spending on infrastructure construction to boost growth.
Ohnsorge said without further reforms to promote employment, such as: Such as expanding trade and facilitating access to land for private companies, South Asian countries would fail to achieve their development goals.
Modi has set a goal for India to become a developed country by 2047, while Bangladesh has said it wants to reach that milestone by 2041. “In a scenario without reforms, this ship has sailed,” Ohnsorge said.
Bangladesh is expected to be the region's second-fastest growing economy at 5.6 percent in 2024, while Pakistan is expected to grow 1.8 percent after contracting during an economic crisis last year.
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