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India will add 110m people to global workforce by 2020: Study

Last updated: 28 July, 2010
New Delhi, July 28 (PTI) 17:47 IST

A demographically young India will be the largest contributor to the global labour force in the coming decades, and will add about 110 million workers by 2020, a study by Goldman Sachs said.

In contrast, China's labour force will increase by 15 million and Japan's will decline by 3 million over the next 10 years. The growth of workforce in Brazil and US will be lower than that of China.

The study said that India's labour force is expanding at a time when many other countries are facing "ageing-related issues" (older populations) and shrinking workforce.
India's workforce growth, it added, will be driven by people in their 30s and 40s, urbanisation, and rise in number of working women.

"India will likely provide the largest increase to the global labour force over the next few decades. Our projections suggest that its labour force may rise by 110 million this decade," said the study, India's Rising Labour Force.

"Our projections take into account increases to the labour force participation rate due to a favourable age structure. Thus, our labour force projections are higher than those of the ILO (80 million)," it added.

The study said that nearly half of the increase in the labour force in the next 20 years will come from the "thorites" (people in their 30s and 40s) age group, which tend to be the peak years for earnings, savings and productivity.

Besides, increasing urbanisation and a large number of women potentially entering the workforce will stoke the trend, it added."We estimate that an additional 290 million Indians may urbanise by 2030, and a staggering 640 million by 2050," the study said.
However, it added that to be able to absorb such a large labour force, especially one that will move from agriculture into industry and services, the Indian industry would need to create 40 million jobs over the next decade.

It also cautioned that to be able to reap dividends from favourable demographics, India will have to overhaul its labour laws that restrict hire-and-fire policies and invest heavily in education and and skills training.

It said that with the right policies in place, demographics alone may contribute to about 4 percentage points of the annual GDP growth for the next two decades.

"If India gets its policies towards demographics wrong, it could potentially lose annually about 1.5 percentage points from our base case of 8 per cent plus GDP growth till 2020," the study warned.

"On the other hand, `good' policies could push potential annual GDP growth to well above 9 per cent over the next decade," it added.

Spurred by such favourable demographics and economic growth, the study predicts that there would be a rise in demand for risky assets.It said the share of equities in household savings could double from 5 per cent today to 10 per cent in 2020, with annual inflows into them rising six times by then, compared to a 2.5-fold increase in bank deposits.

As for consumption patterns, the study said that spending on health and education may increase five-fold in 10 years, compared to 2.5 times on food and beverages.
Similarly, demand for autos and transportation as well as housing and appliances may also increase due to the overall rise in spending.

On the downside, the study stated that such a large workforce will increase demand for commodities at a time when resources are stretched and environment issues have become dominant.

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