Jobs for Resilience Report

What’s in today’s article?

• Why in News?
• Key Highlights of the Jobs for Resilience Report
• Risks Highlighted in the Jobs for Resilience Report
• Case of India
• Way Ahead Suggested in the Jobs for Resilience Report

Why in News?

The World Bank (WB) has warned in its ‘South Asia Regional Update: Jobs for Resilience report’ that the South Asia region including India was not making use of its demographic dividend.

This is because the pace of job creation in the region fell well short of the growth in the working-age population, even as it projected a strong 6.0-6.1% growth for 2024-25 for the region.

What’s in Today’s Article?

• Key Highlights of the Jobs for Resilience Report
• Risks Highlighted in the Jobs for Resilience Report
• Case of India
• Way Ahead Suggested in the Jobs for Resilience Report

Key Highlights of the Jobs for Resilience Report:

• Deceptive strength:
  • Output growth in South Asia, projected at 6.0-6.1% in 2024–25, continues to exceed that in other emerging markets and developing economies (EMDE).
  • But this is largely due to strong growth in India and in the rest of the region it is expected to remain mostly well below pre pandemic averages.
  • More than in other EMDE, growth is being driven by the public sector, whereas private investment continues to be weak.
  • Many of the underlying vulnerabilities that had previously caused balance-of-payments pressures remain, and point to downside risks to growth.
• Private investment:
  • Private investment growth has slowed sharply from pre pandemic averages in all South Asian countries, hampering the region’s efforts to meet development and climate objectives.
• Climate adaptation:
  • South Asia is highly vulnerable to climate change. However, severely limited fiscal positions will limit the scope for public policies to facilitate climate change adaptation.
  • This means that the burden of adaptation will fall disproportionately on firms, farmers, and households (especially poor), which typically suffer greater damage from climate shocks.
• Jobless development:
  • South Asia’s labour markets stand out among EMDEs for having suffered for decades from declining employment ratios and exceptionally low shares of women in employment.
    • Employment ratio is the employment relative to the total working-age population.
  • While agriculture has shed labour, the non-agriculture sector has been unusually slow in creating jobs.
  • This partly stems from challenging institutional and economic environments that have held back firms’ growth.
  • As a result, the region has relied on labour productivity and population growth as engines of output growth.
  • However, working-age population growth is likely to decelerate, and labour productivity growth has already slowed significantly since the COVID-19 pandemic.

Risks Highlighted in the Jobs for Resilience Report:

• Efforts to reduce high debt, borrowing costs, and fiscal deficits may eventually slow growth and limit governments' ability to respond to increasingly frequent climatic shocks.
• The provision of public goods is among the most effective strategies for climate adaptation.
  • This is especially the case for households and farms, which tend to rely on shifting their efforts to non-agricultural jobs.
  • These strategies are less effective forms of climate adaptation because opportunities to move out of agriculture are limited.
• The weak employment trends in the region were concentrated in non-agricultural sectors.
  • Because employment growth is falling short of working-age population growth, the region fails to fully capitalise on its demographic dividend.
  • The region could have 16% higher output growth if the share of its working-age population that was employed was on a par with other EMDEs.

Case of India:

• India’s employment growth was well below the average growth in its working age population for the 2000-23 period.
• The country’s employment ratio had declined more than in any other country in the region except Nepal up till 2022.
• However, preliminary data suggested a 3-percentage point rebound in 2023, which had partially reversed the decline.
• Noting that India’s economy was expected to post a robust growth of 7.5% in FY23/24, the WB said this expansion coupled with recoveries in Sri Lanka and Pakistan, was largely driving the strong numbers for the South Asian region.

Way Ahead Suggested in the Jobs for Resilience Report:

• Stronger job creation and the easing of financial market restrictions could help boost growth, private investment and government revenues and put in place conditions conducive to climate adaptation.
• Sustained accelerations in private investment are most likely to occur when institutional quality is strong, the real exchange rate is competitive, and economies are more open to trade and capital flows.
• Adaptations that involve public support tend to be more effective than purely private strategies. The analysis suggests that policy should be guided by three principles:
  • Implementing a comprehensive package of policies;
  • Prioritising policies that generate “double dividends”; and
  • Designing policies that target non-climate goals in a manner that does not set back climate-related goals.
• Sustaining growth will require increasing employment ratios, especially in the non-agriculture sector and among women, through -
  • Measures to remove obstacles to growth for businesses,
  • Increase openness to international trade,
  • Ease labour market and product market restrictions,
  • Build human capital, and
  • Strengthen equality of women’s rights.

Q.1. What do you mean by the term “double dividends”?

Double dividends refer to the idea that environmental taxes can reduce pollution (the 1st dividend) while also lowering the overall economic costs of the tax system by using the revenue to replace other more distortionary taxes that slow economic growth (the 2nd dividend).

Q.2. What is the national adaptation plan of India?

The National Adaptation Fund for Climate Change (NAFCC) was established in 2015 to meet the cost of adaptation to climate change for the State and UTs of India that are particularly vulnerable to the adverse effects of climate change.