Lifted by India, South Asia Regains Growth Lead, Still Lags on Jobs

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Martin Rama
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WASHINGTON – South Asia has regained its lead as the fastest growing region in the world, supported by recovery in India. With the right mix of policies and reforms, growth is expected to accelerate to 6.9 percent in 2018 and 7.1 percent next year.

The twice-a-year South Asia Economic Focus (SAEF) finds that the region could even extend its lead over East Asia and the Pacific. Much of the progress, however, is driven by India’s growth rebound and is not consistent across countries. Despite accelerating global growth and trade, exports remain weak. Progress on fiscal consolidation is slow, and deficits are high.

Martin Rama

This edition, Jobless Growth?, argues that growth alone will not be enough to attain the higher employment rates enjoyed by other developing countries, especially among women. “More than 1.8 million young people will reach working age every month in South Asia through 2025 and the good news is that economic growth is creating jobs in the region,” said Martin Rama, World Bank South Asia Region Chief Economist. “But providing opportunities to these young entrants while attracting more women into the labor market, will require generating even more jobs for every point of economic growth.”

While the number of working age people is increasing, the fraction of working-age people who are at work has declined in most countries in South Asia based on employment data analyzed from 2005 to 2015. Some decline was to be expected, as higher incomes allow households to prioritize education, health and other commitments. But the fall in employment rates in South Asia has been much faster than in East Asia. And it has been particularly strong in India, Bhutan and Sri Lanka, especially for women, the report shows. With declining employment rates, the region is foregoing some of its potential demographic dividend.

To arrest further declines in employment rates, South Asian countries would need to create 11.7 million jobs a year, which is feasible if the current growth momentum of the region is sustained. But if South Asia wants to increase employment rates to the levels seen in other regions with similar income levels, it would need to create many more jobs. The focus should also be on better jobs, as regular wage employment remains the exception more than the norm.

“Growth is important, but even very high growth will alone not be enough to increase South Asia’s employment rate”, said report author Robert Beyer. “Policies and actions are needed to make growth more labor-intensive, and especially to create the kinds of jobs that can encourage greater labor force participation by women.”

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