Although India has been successful at improving output growth through rising
labor productivity, the lack of meaningful employment growth in the face of strong
population growth poses a serious risk to India’s future. By definition, growth in India’s
labor force is a key factor undergirding the country’s growth in potential output. India
currently has over 500 million people younger than 25 and the country is slated to have
the world’s largest workforce before 2030. Any estimate of sustained higher growth rates
for India relies significantly on the country’s capacity to employ this young population
and to switch workers from the agriculture sector to the faster growing industry and
services sectors (UBS, 2006). Optimistic growth projections for India also rely on
continued economic and social reforms.4
The unequal benefits of India’s growth have