Can India copy China's demographic dividend and become a US$40 trillion economic powerhouse by 2047?

Bright and engaging, 16-year-old Mahesh Sharma began delivering groceries for a busy New Delhi shop five years ago. He wanted to support his mother and younger brother after his father left the family one day and did not return.

His brother Rohit, now 13, also found a delivery job during the pandemic that shut Indian schools for two years - the second-longest closures globally, according to Unesco - and has not returned to class.

"He's not interested," said Mahesh.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

Asked if he himself would like to go back to school, he shakes his head, grinning, then pedals off into the city's chaotic traffic to make another delivery.

Mahesh and his family encapsulate some of the challenges facing policymakers who want to ensure India's surging army of young workers emulates the success of China and becomes a demographic dividend rather than a "demographic disaster" and an economic drain.

A new report by the Confederation of Indian Industry (CII) says India has a three-decade "golden period" to leverage its bulging working-age population to boost growth.

Successfully harnessed, the surge in young workers could transform India into a US$40-trillion economy by 2047, the 100th anniversary of independence, from US$3 trillion now, the CII says.

But it warns India must train its workers fast and create enough jobs to avoid squandering its demographic advantage.

Both government and industry will have to step up education and training efforts, rewrite "obsolete" curricula and work harder to engage students and keep them in school. "This is the most crucial decade," said CII chief economist Bidisha Ganguly.

The urgent need for action was driven home by a study by talent evaluation company Aspiring Minds, released just before the start of the pandemic. The survey of more than 170,000 engineering students found 80 per cent were not employable "for any job in the knowledge industry".

There exists "a deep chasm between the actual skills of engineers and the skills expected from them on the job", Aspiring Minds said. India's education system needs "fundamental change" and "out-of-the-box ideas", said the firm, now part of US-based talent acquisition firm SHL.

The scale of the skilling challenge is immense. Despite an already declining fertility rate, India's population will hit nearly 1.5 billion by 2030 and 1.64 billion in 2047, up from 1.4 billion now, the CII said.

In 2020, there were 900 million or 67 per cent of the population in the 15-64 working-age group, according to United Nations figures. Another 101 million will join by 2030 - when the proportion of working-age people is expected to peak - and a further 82 million will be added by 2050.

This represents "an exceptional strength compared to the rapidly ageing population" in Western countries and China, the CII said. In the decade after 2050, India's working-age population will start falling.

The median age in India now is 29, well below China's 37 years and 38 in the US. China's working-age population began shrinking in 2012 and will fall by 26 million by 2030 and by a further 148 million by 2050, the CII said, using UN data.

China's economic boom created tens of millions of jobs between 2002 and 2012. A similarly huge pool of working age people should, in theory, give India its own competitive edge with inexpensive labour and large markets, allowing consumption-driven domestic growth and attracting foreign investment.

But to make that vision a reality, closing the skills gaps and creating quality jobs will be critical. Alarmingly, 27.2 per cent of Indians aged 15-29 are so-called "NEETS" - "not in education, employment or training" - the World Bank said.

According to the private Centre for Monitoring the Indian Economy, India's unemployment rate stood at 7.6 per cent in March, down from February's 8.6 per cent, but still high for a poor country like India.

Worryingly, India is now experiencing a "reverse structural transformation". India's total employed workforce went up to 427 million in 2019-2020 from 381 million the previous year, but of these 46 million jobs, 71 per cent or 33 million were created in agriculture.

Manufacturing rose by 1.65 million while construction climbed by 3.58 million in 2019-20 and the trend seen likely to continue over the next few years after the pandemic threw millions out of work, forcing them to return to their homes in rural India.

"The reversal in India's structural transformation back toward agriculture is a sign of fall back to subsistence employment," said the CII.

New Delhi education consultant Dipankar Trehan said businesses need to get more involved with schools and colleges, co-manage skilling programmes and invest in upskilling. While the revision of school curriculums has begun, he said, "many are still obsolete in their presentation and contextualisation".

"The world outside has moved on" and with technological changes, students' careers need "future-proofing".

There is also the extra complication of learning lost to Covid-19. Experts fear the pandemic, which kept 247 million Indian youngsters out of classrooms, will add to the already existing major learning gaps between affluent and poor children.

The percentage of children studying online "regularly" in deprived villages and slums last year was just 24 per cent in urban areas and 8 per cent in rural India, which is home to 70 per cent of the population. That was according to the "Emergency Report on School Education" study led by prominent Indian development economist Jean Dreze.

There were online classes, but many children did not have mobile phones or were not connected to the internet. Some 37 per cent of the 1,400 students surveyed stopped studying, many due to family financial problems caused by the pandemic.

Now schools have reopened, experts say syllabuses must be reworked so students can recover forgotten literacy and maths skills. "This is by far the greatest emergency that is going to face any education system, ever," said Anurag Behar, head of India's charitable Azim Premji Foundation.

Until the first lockdown in March 2020, India was making strides in school enrolment, literacy and social mobility, and millions were emerging from poverty. India's literacy rate has increased to 78.4 per cent from 1947's 12 per cent at the end of British rule, according to census data.

However, that still means nearly 25 per cent of the population cannot read or write. Also, as literacy census data is largely self-reported, its accuracy is not always considered "robust". (Nepal's literacy rate is 55 per cent and China's is 96.8 per cent, while globally it is 86 per cent).

There is also the issue of malnutrition which can prevent children learning properly. In 2019-2021, 35.5 per cent of children below five were smaller than they should be, due to an inadequate diet. India's per capita income is US$2,170, still well behind China's US$10,430 and the US at US$62,794, according to World Bank data from 2020.

And while educators have consistently advocated India should spend 6 per cent of GDP on education, the allocation has remained around 3 per cent. (The global average is 4.2 per cent).

Furthermore, while China expanded its vocational system to develop a skilled manpower base to become "factory to the world," India's primary focus - although now broadening - has been on academic achievements rather than technical or vocational education.

The CII said that in 2019-20, only 73 million of India's 427-million employed workforce received any form of vocational training, whether formal or informal.

To put it in an international context, the proportion of formally skilled workers as a percentage of the total workforce stands at 24 per cent in China, 52 per cent in the US, 68 per cent in the UK, 80 per cent in Japan, and 96 per cent in South Korea against a paltry 3 per cent in India, the report stated.

What has to be noted, though, is that many Indian workers are what is called "informally skilled - they have learned on the job", Ganguly noted.

"We'd missed the bus for a long time but I do think we're going in the right direction, particularly in manufacturing. We're making gains in sectors like electronics, like textiles," Ganguly added.

"We also need to focus more on tourism and hospitality and health where low-skilled workers (who will continue to dominate India's workforce) can be employed. The pandemic's been good in that it's put an emphasis on the health sector in which a lot of jobs are being created."

Still, there is a lot to be done. The Aspiring Minds study also found that the percentage of engineers employable in "new-age" skills like artificial intelligence and data science ranged from 1.2 per cent to 5.3 per cent, and that was just among engineers who felt capable of taking the test, meaning the "aggregate employability percentage will be even lower", Aspiring Minds said.

"The US and China are marching ahead in AI and India needs to develop a critical mass of engineers with AI skills," the company commented.

So how to boost skill levels among the 183-million youngsters who will join India's workforce by 2050? Higher education needs to become more flexible and modular and there should also be more student financing, says the CII.

It also proposes a National Skills University; the establishment of multi-skill training institutes in industrial clusters to teach skills based on local demand; giving young people "skills vouchers" to fund industry training; and offering more apprenticeships.

In an effort to respond to concerns, the government has formulated a new National Education Policy which aims to create a "second-to-none" education system by 2040 and which will jettison rote-learning methods to allow kids to "think critically and solve problems".

Said education consultant Trehan: "I'm optimistic. A lot's already happening. The government's stepping forward to make an impact, and the positive developments should continue."

This article originally appeared on the South China Morning Post (SCMP).

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.