Hello, and welcome to Stephanomics, the podcast that brings the global economy to you. The Indian economy has grown by at least six or seven percent in nearly every one of the past twenty years. That's almost double the growth rate it achieved in its first fifty years as an independent state. But somehow that success isn't translating into jobs.
In fact, less than half of the working population is working or even actively looking for work, and the vast majority of Indian women are out of the workforce altogether. So what's going wrong and how important will it be for the newly elected Prime Minister nor Indo Moody to fix it? While a few minutes I'll talk about it
with Bloomberg columnist and writer Mihir Shama. I'll also have some brand new research on exactly how the US China trade wars and tariffs are destroying economic activity the US, China and other countries. But first, here's my colleague Aniban Nag who took a closer look at India's job shortage with fellow reporter Fristie p Anywell. That is the busy Promhabib, the station here in central Mumbai with thousands of commuters
mill in and out during the morning rush hour. The Indian railways are famous as one of the biggest employers in the world, and this particular station is being manned by a station master, booking clerks and a few sweepers. These jobs don't pay much, but a staggering twenty eight million implied to do one of them recently, and the department that runs the railways announced agnes. One of those who try to get a railway job was sish Kumar. I wanted to stick to a job with computers, but
it's so difficult to land a job. If someone knows you, then you get a job. Otherwise it's next to impossible. About We met Sorresh there his one room, rented a house that is a stone's throw away from an open drain and part of one of the most densely populated colonies of Delhi. He's medium built and dressed up for work in a formal cotton shirt and trousers. It's morning, but he's already starting to sweat in the Indian summer, where temperatures can soar past hundred and ten. They raised
farre and high. He's thirty years old and holds a diploma and computing from a private institute, but he's working as someone's driver, his wife as a maid. I was hoping for older than that when he moved here from India's central region of mad Depradation. But he recognizes he's one of the lucky ones back in the village. There's so much poverty. We can't even open our own business and there are no banks to offer support with loans.
In Delhi, at least you can get a job. I am driving as I have a home to run and send kids to school. Sy Ha's a job, but he's under employed. India's economy is not getting the best out of him. Twelve million Indians entered the labor market each year, and an increasing number of them are under employed, lights
race or not in work at all. It was like any week of December that we were told that they will be letting go of the staff and then from there try and if they can survive this stress, which also did not happen because in April almost everybody was asked to go. We found a woman we call Alia because she did not want us to use her real name. We met up in Bloomberg's office in New Delhi, where
she lives. Aliyah, who's in her mid thirties, lost her job as a marketing and communications manager after her company's sales failed to gain traction, just as the country was put through a huge challenge of changing much of the currency in circulation. Did they tell you what was the reason for that? No, they just told that they were not able to kind of sustain the operations that they were having. Her mother isn't aware she has lost her job.
Her father knows the truth and can sometimes get despondent about her job prospects. Aliyah says she has been able to get some work here and there. She has even managed to repay a Carlo, but it has been tough. I take up freelance projects from time to time, and I try to and obviously try to find, you know, anything that I can apply to. So what I mostly get as a response is that either there are too many aspirants buying for a singular job and so the
competition is obviously increased. A part of it was also given to the fact that you know, I'm looking for a job role which is intermate management kind of position and order fresh level, and also the fact that you know the plans keep changing. A lot of positions that are that are actually they think are available go on hold for no reason. There's a lot of uncertainty in terms of organizations in terms of what they they're planning for the next six months to a New York time earlier.
Part of the official jobless numbers, and that is probably the tip of the iceberg. The bigger problem is that half the working age population and of women are not even included in that official jobless total, but they're not looking for work at all. India is not the only developing country struggling to bring women into the workforce. What is troubling is that the situation has been getting worse even as the overall economy has been doing quite well.
According to the World Bank, nearly twenty million women, a number roughly equivalent to the population of Sri Lanka, dropped out of the workforce between two thousand and five and two thousand and twelve. Economists tell us that this is an enormous missed opportunity, but don't take their vote for it. Ask Christine Lagard, the head of the International Monetary Fund, you can increase US t DP by five because you
can increase Indian GDP by twenty seven and decent. If you look at diversification, we have now documented evidence of the fact that when women participate in the economy and in the labor market as much as men do, you have a more diversified economy. And by bringing women to the to the labor markets, giving them access to finance, you reduce the inequality. What would that take in India? We asked some Toshirotra, a professor at New Dearle's Jawaharlal
Nehru University. He's an export and employment and labor issues for girls. If you want to make sure that they get jobs, then we have to ensure that childcare. Affordable childcare is much more easily available. UM, public transport is much safer than it has been in the past. UM. And above all, of course, job growth, non agricultural job growth has to happen in construction, in manufacturing and in services. You wouldn't know there's a problem from the latest election results.
Prime Minister in the Rain the Remote won the country's massive vote last month with an even larger majority than before, but he does recognize the issue. One of the first decisions after taking office for a second five year term was to form a committee of senior ministers to try and address rising on employment. Oh yeah, says it's hard time they deal with the issue because it's a lot bigger than the numbers indicate. Comar, the driver, blames India's
education system for the lack of opportunities. Way was that that can't be there? Who made the English community? My English is weak in the villages. They don't teach much English. I started studying English only in the fifth grade and not the first. If I have to blame anyone, it is perhaps myself. So I think I should have more complications of degrees. It can really need to lay out the lack of suitable opportunities. So someone like Coomar risk
astonishing the country's image as a major investment destination. Not only that there's a chance of social unrest. Above all, it poses a challenge to policy makers who are keen to read the demographic dividend of a young population, which means it can be a major drive of economic growth. The time is ticking, though, by the share of India's population to that of working age will start declining. India will have to act fast if it has to harness
that demographic dividend. By providing jobs to millions sooner rather than later. Kumar thinks it's already too late for him, but he's still holding out hope for the next generation. A year, I have given up hopes of getting a better job. I will get along with whenever it takes.
The kids should have better prospects. So I'm very happy now that I can speak to one of Bloomberg's key India columnists, Mihir Shama, about what this means for in his economy and what Prime Mr Modi might be able to do about it going forward, having just been re elected last month. Here, I guess one question people might be asking. I started the program mentioning that India was an economy that had grown six or seven percent a year,
pretty much every year for the last twenty years. How has it done so well while not finding jobs for maybe half of its working age population. I think that the real joblessness is a relatively recent phenol. The real jobless growth is a relatively recent phenomenon. Um Up to
around twenty eleven, I think jobs were getting created. A lot of those were in, for example, the construction sector, which has traditionally managed to soak up large numbers of relatively underskilled people, particularly from rural areas, in a rapidly expanding urban economy. Around twenty eleven or twenty twelve, the
economy begins to slow. You know, you have the crisis, then you have the post crisis stimulus, and then when the stimulus over reaches in around twenty twelve, the economy slows. Investment slows for some reason. Um that slowing is reflected in the job growth numbers are both official and unofficial, but is not showing up as much as one would expect in the new GDP statistics, which has led many people, as as it happens, to start questioning India's growth figgers themselves.
But the truth is that from after liberalized fastion, the first ten, fifteen, even twenty years were pretty good for jobs, not as great as they could have been, but not bad. It's really in the past father, nor though year, that we've begun to see something of a crisis. And if you look at the structure of growth, I mean, is it is it to do with the composition of growth
that you're not getting the jobs. Like our our economist at Bloomberger, Abishek Gupta, has looked at how in a sense the whole is not necessarily in the manufacturing silence in service sector, and the inability to inability to unleash the service sector is that a big part of it. No country in history has been able to um incorporate unskilled people from the rural economy into a growing middle
class with secure jobs without building a manufacturing sector. It is possible, surely, perhaps to do it without but unless you've got oil or something, you can't. There's no there's no roadmap. It's never been done before. India has been d industrializing since the late nineties, which means that the contribution of industry to GDP peaked in around nine ninety
seven and since then it has been going down. That's not okay because what that gets replaced with is, of course an increase in the proportion of the service sector in g d P. And the service sector is not you know, we're not talking high level it stuff here, all right. That maybe the image of India, But what the service sector actually is is very very small enterprises
one person, two persons, three people working together. In the Prime Minister's words, even a guy frying up dumplings is also a job, right, But those aren't the kind of jobs. I think that people think about when they want them, and those aren't the kind of jobs that create a
sustainable middle class. There is really no on for even right now after what could repleeve math manufacturing export oriented math manufacturing as the creator of job So I know you like giving primers demodi advice which he doesn't follow. We shouldn't necessarily stop now if you're just been reelected and have some pressure on you, maybe surprisingly not as
much pressure as you might think. I think if less than half of the working age population in the UK or the US we're in work, there would be that would be the only issue on the horizon. I see that that's not really the case in India. But if you're under pressure to deliver m after this election victory, what leavers can he pull? I mean, what would be the key reformer is that you would think of to
try and change how much jobs are being created. I think there are three things that you need to do almost immediately because time is running out for all of them. The first is to obstantively change what are called factor markets, so the markets for land and labor in particular. UM, it's very difficult to fire people in India which is
why very few people hire them. We have incredibly small textile production facilities, like our textile factories are you know, maybe an average of fifteen or sixteen people in India as opposed to over two to three in just in Bangladesh next door. And so we're uncompetitive when it comes to producing textiles, which is a labor intensive sector. Um So you need to change the laws that constrain the sale of land, that constrain hiring and firing workers. That's
point one. Point two is that you have to ensure that you get embedded into global supply chains. Currently, India is, like many other countries around the world, moving in a somewhat protectionist direction. We're putting up tariffs on you know, things like mobile phones and the idea areas to try and create a domestic electronics manufacturing sector, but obviously we know that's not going to happen because of the way
that that manufacturing is now organized globally. Um So you have to embed yourself in these global supply chains rather than you know, extracting yourself from them. And the third and I think really the most important at this point is that you need to work on basic educational and skills. We have some of the worst schools in the world.
According to many studies, there are kids in class eight in the you know, in their eights here of schooling in the eighth grade who cannot do maths at a second grade level, and that's the majority of So you need to intervene both of the primary level and with those who have already left school and are and are currently underskilled. So those interventions have to be massive and immediate, the educational ones. And you did mention we had at the end of that segment as well. This question is
the time pressure. Um. You know, you might think India had all the time in the world given the scale of its economy and a number of people, but this key demographic point that you have a sweet spot as an economy where you have a sort of peak a number of working age people with fewer children, having fewer children, but no longer, not not getting older yet. How important is it for India to get this right before it starts seeing that demographic change and the aging that we've
seen in that obviously in other countries. So one of the crucial questions in development of can a country get rich before it gets old? Right? And the truth is that we are a much younger country than a lot of others where our average age is still in the twenties where within China, Japan, But that obviously won't last forever.
As birth rates begin to fall going forward, our average age will increase, which means that the proportion of people in the working age population as opposed to those out of it, will begin to Right now, we are seeing a lot of growth and a lot of dynamism precisely because that working age population is increasing in composition, in size, in proportion. That will not be the case going forward.
And the bad news is it is already the case that we are facing demographic demographic pressure in some of the more advanced and developed parts of India. States along the coast in the south of India, which have higher human capital levels, which are more integrated with the global economy um which have better skills, those areas are in fact already beginning to see this demographic change. They're getting older.
Where population growth is really coming from, where we have our current youth bulge, all these working age population, working age people applying for these jobs in the railways and so on and so forth. That's in the north, in the interior, and that's not that's not a part of the country that is properly connected to the global economy. It's not connected to markets. These are people who are underskilled. So there is this a regional disparity in how things
are turning out that evolved a problem. Some people listening may have the same experience that I have that the the Indian business people that one sees at conferences or interviewed often on Bloomberg or in anywhere else, you get the sense of an incredibly dynamic economy really digitally switched on developing things that actually are ahead in many cases of advanced economies on the digital front um, and even
on applying it to some public sector challenges. Is that just are we seeing just a tiny fraction, Because if you listen to those people, you would think, wow, India is going to be able to ride the wave of all these technological changes that are happening around the world that everyone fears India is going to clean up as a result of those changes. Well, I mean there are
two things to be said there. The first is one should never trust what people in Indian business see, only what they do and when they start investing in India, then I will take their claims that India India has a bright future. Seriously, we have a crisis and private investment has been shrinking for for years as a proportional GDP, and that doesn't appear to have cleared up yet, so they don't appear to have confidence in where they're putting
their money. So I don't believe anything they say about you know, when when they make all these sort of claims about India's future. The other thing about you know, can India righte the you know, automation digital wave of the future. Everybody else is worrying because they're losing jobs. I don't know. I suppose you can be more optimistic about it when you've never had the jobs in the
first place. If you see the entire world moving towards an economy, you know, which is precarious when nobody has a real job where you have to work three things, and you know you have service sector jobs that don't
pay enough. Well, we've lived that already. But the truth is that we are worth off because we need to at least have a phase of those manufacturing jobs in order to build the middle cloths that can then complain we've never built the middle cloth that can complain, so you're not hearing any completely well uh here, that's many people who read your college would say that's a characteristically blunt assessment of the situation for India's economy. But thanks
very much for joining us. Thanks so Some people would say that we talk too much about trade wars on this podcast, but we have a lot to say about them, and this week is no exception because we have a really interesting analysis by our economists who are part of Bloomberg Economics, of the impact that trade wars are having already, particularly in China, but also on production levels and sales
in the US. And I'm very glad that I can talk a bit with one of the people who crunched the numbers on this, one of our Eurozone economists, maybe a Kuza maybe. Thank you very much for joining us from Zurich, Hasty if any, thanks for inviting me. So tell me a little bit about this research, because what was interesting to me is that although often people have talked about the big picture potential impact of trade wars on global growth, you took a micro approach looking at
the imports that have been affected by tariffs. What did you find so yes, we used very detailed data from the US International Trade Commission, and we looked at the different categories, the six thousand plus categories of products that have been imposed some tarifts by the US on US
on imports from China. And what we've found first is that when you look at the value of imports from China across those categories which have been parift since Juday to September twenty eighteen Juday to September last year, if you look at the time series, you can see a sharp top which happens just after the introduction of the
different waves of tariffs. And in total, if you look at the value of US imports from China across those categories in the first quarter of twenty nineteen, so after the introduction of all the tariffs of the first wave of tariffs, and you compare with what happened a year earlier, that is value on those goods is done by twenty six percent. That's fifteen point eight billion dollars worth of Chinese imports that have not entered the US across across
those those products. What's interesting as well is that when we looked at what happened to imports of those products from the rest of the world. They have increased a little bit, but only by five point four billion dollars in the year to UH the first quarter of twenty nineteen. So in total, it's a gap of ten point four billion dollar worth of imports that has not entered the US and those categories that have been tariffed for China.
Have you seen any evidence of this diversion of trade as a result of these harriffs that you just get the same products coming in from other countries rather than the reduction in imports overall. So we've seen a little bit of that, indeed, of diverge, diversion from them away from China and to other countries um as you can see, because there's still a ten billion gap in imports across those categories. It does only partly of set the impact of lower trade with China, but we've seen some of that.
We've seen in particular if you look across the main trade partners for the US and the main countries in the Asian subplate chain, countries like Vietnam, Vietnam, Taiwan, and South Korea, I've seen an acceleration of their exports to
the of their exports to the US. I noticed in your report that they also looked like there were just some sort of creative ways around these tarriers that were being found, like, for example, those big surge in the number of TVs coming in from China to the US which are not subject to tarriers, and a reduction in the number of TV parts coming in because those are subject to tariffs. But you would say that there's still been a real impact on Chinese producers. Yes, I think so.
I think there has been a little bit of moving across categories from from tarift categories to nontarift categories at the margin, but overall, I think that's on the top.
And indeed, um total Chinese imports, total imports from China to the US acrourse tarift and learned tarift categories of decline from the first quarter of twenty eighteen to the first quarter of because I mean President Trump would say this is all great, because it's going to provide room for all these US manufacturers to get in and start producing things themselves. Have we seen domestically made goods filling
the gap? So unfortunately we can't see that from the data we have because there are childe data, so we only imports. What I would say is that when you look at them at this imports number, it has clearly has had a very disruptive effect on US imports from China. It has had a disruptive effect on US imports total total imports from the world in total, as we can see these ten billions worth of goods that didn't enter
the US. And that's because China was such a dominant player, such a big player across those categories that as the rest of factories in the rest of the world, we're not big enough to pick up the slack and to
HaVeset the effect. And because many of those goods are actually intermediate goods, good that US factories would use in their production process, it is likely to have a creeping impact on US industry because basically what happens is that part of the supply chain, the backward looking part of their access to supply has been broken. Thank you very much. I hope we have you on again as we track the impact of this trade will thank you thanks for
listening to Stephanomic. Join us next week for more on the ground insight into the global economy. In the meantime, you can find us on the Bloomberg Terminal, website, app or wherever you get your podcasts. We'd love it if you took the time to rate and review our show so it can reach more people. And for more news and analysis through the week from Bloomberg Economics, you just have to follow us Economics on Twitter. You can also
find me on at my Stephanomics. This episode was written and reported by Anaban Nag and Rishti beneval I should mention that you also heard a clip in that piece from Christine Leguard, which was actually recorded at a Bloomberg event in December six. It was produced by Magnus Hendrickson and edited by Nastrine Syria and Scott Laman, who's also the executive producer of Stephanomics Special thanks to Mehir Sharma and Mahiva Kuzan. Francesco Levy is the head of Bloomberg Podcast