A close-up shot of the Indian rupee (INR). Courtesy of Pexel. Free to use
India is one of the fastest-growing economies in the world. On pace to become the third-largest economy, surpassing Japan and Germany, by 2028. India also has the second largest labor force in the world, second only to China, with 476.6 million people. Despite all the positive signs, there are several glaring complications for the future. Amid a booming economy, it cannot accommodate the millions of new workers that are entering or are poised to enter the workforce. Over 42 out of 100 youth workers do not find jobs in their desired field of work. That is approximately 73 million unemployed young people, and currently, 100,000 new workers are entering the economy for jobs. This reveals a catastrophe developing right under our noses. In every economy, there are two employment sectors, formal and informal. The former is a form of employment where there are clear terms of employment, and the government supervises it, such as most office jobs, factory work, or bureaucratic positions. As the name suggests, the latter provides less job security, employs workers for wages on the margin, and the government does not supervise. Some examples of informal jobs might be food hawkers, seasonal agricultural workers, or freelance repair persons. Demonetization of the Indian banknote in 2016, the COVID-19 pandemic, and the failed labour transition from agriculture to the service sector are several factors causing this debacle. Demonetization brought the entire middle-low class population to a standstill. In 2016, over 600 million Indians did not have a bank account, so there was no way to remunerate informal workers after the government issued the demonetization order. The sheer instability caused by COVID-19 cannot be overstated, as the pandemic forced 57 percent of informal workers into debt from June to August 2020. In 2014, as part of his campaign, Narendra Modi, the current Prime Minister, promised 100 million new jobs to youth by 2022. Here we are in 2023, and it has yet to be determined how many jobs Modi has added to the economy, never mind to the youth. One of the most significant factors causing unemployment was demonetization in 2016. On November 8, 2016, Modi announced that the government would ban the currency of INR 500 (about USD 6.15) and INR 1,000 (about USD 12.3), rendering 86 percent of the total cash flow illegal. One main contributor to this policy was the black economy — goods being illegally sold via the black market — which made up about 20 percent of India's 2016 GDP. This market meant the Indian government was losing a significant amount of tax revenue and regulation power. The demonetization policy successfully combated that issue, but also financially crippled hundreds of millions of citizens. The policy move resulted in a dramatic drop in GDP growth in the next two quarters. It also significantly disrupted the informal sector, where employers could not pay their employees because the notes possessed no purchasing power in an open market. It immobilized many employees and reduced an already decreasing labor force, with the youth unemployment rate increasing by 0.8 percent two years into demonetization. However, it did recover by about .3 percent in 2019; unfortunately, COVID-19 intervened and decimated the national economy. COVID unsettled the world's daily economic and societal balance for around 18 months. In 2020, from April to June, India's GDP contracted by 24.4 percent, recording the overall GDP contraction for the fiscal year 2020/21 by 7.3 percent, the worst financial year in its history. The pandemic also shut down the entire country and its 1.3 billion citizens for 68 days from March 25, 2020. This severely crippled the labor industry; furthermore, numerous businesses axed their employees in order to save financial resources. The lockdown also stalled the education sector, which forced students to take classes through their phones because families, traditionally, did not invest in everyday technology like computers, tablets, etc. Thus, the new wave of graduates were not as skilled or trained as prior classes of new workers. Female labor employment also reached historic lows. In 2021, Indian female employment, to the female population, crashed to 19 percent, lower than in Pakistan, Saudi Arabia, and Bangladesh. Despite its massive youth population, young people in India make up the lowest share of the labor force, with 19 percent, while young women account for just 5 percent of the labor force. The economy has also failed to provide jobs for new workers entering the job market.