Changing Demographics and the Future of Jobs in India

The rising middle-class, higher proportion of young workers and increasing urbanization will impact the future of jobs in India for the coming decade. The Indian “global middle-class” which is expected to quadruple by 2020, will drive domestic consumption and thereby increase the quantum of jobs.

India’s small “global middle-class” at around 50 million people in 2015, or 5% of its population, is expected to grow steadily over the next decade, but by 2025, this “global middle-class” will become the largest, accounting for about 40% of all Indian consumption, up from about 26% in 2015.

The future of jobs in India

When significant numbers of people begin earning the equivalent of over US$10 per day, and enter the global middle-class bracket, their purchasing habits attract the attention of companies accustomed to supplying to middle-class markets in the developed world. The power of the sweet spot also produces a “middle-class effect”, where the size of the middle-class is directly proportionate to the rate of economic growth. Hitting the sweet-spot level accelerates growth, which, in turn, adds more people to the middle-class, producing a vicious circle.

Higher consumption

In the past 10 years, the consumption levels of Indians have increased by more than threefold and are expected to register even stronger growth in the next decade. The consumption levels are expected to achieve a tenfold increase over the next 20 years. Consumers are now increasingly spending on services like education, leisure, and telecommunications, especially from the emerging middle-class. Also, Indian consumers are shifting toward better, high-priced segments in categories like food, leisure, lifestyle and durables.

Schemes like Digital India are expected to have a profound impact on the consumption habits of Indians as they pave the way to connect Internet users to the online marketplace. Ecommerce websites generate a surprisingly high share of their sales from tier-II and III towns, due to the access they provide to consumers in these locations. The Internet is also enabling Indians to gain access to global education and healthcare.

Rapid urbanization

Indian millennials are the driving force behind the growing digital economy. A recent Morgan Stanley research report says millennials are expected to form over 36% of the Indian population, accounting for 61% of its Internet users and 78% of its online shoppers. They are embracing online shopping through smartphones. The report describes Indian millennials as the largest disruptive force in India for years to come and currently this trend is still in the nascent stage.

The rise of millennials is also redefining the workplace culture. The majority of millennials view innovation and flexibility as the key purpose of business and consider them just as important as profitability. The concept of urbanization is quite unique in the context of India whereby urbanization is not limited to metropolitan cities such as Delhi or Mumbai.

Rapid urbanization is expected in the next decade as almost 40% of the population will be living in cities by 2025. This urban population is expected to drive 60% of the consumption levels in the country. This urbanization trend would be fueled by the Government’s drive to setup 100 smart cities by 2022. What is further interesting is that the increased consumption drive will come from the newly emerging tier II, III and IV cities and not from the mega-cosmopolitans cities like Delhi or Mumbai.

Today, nearly 70% of Indian households have a nuclear construct, representing a 13% increase over the past two decades. While this has many social implications, from a pure consumption point of view, it presents a unique opportunity — for the same income level, nuclear families spend 20%-30% higher per person than joint families.

Clearly, this is an economy and society facing enormous changes and the demand created by such a dynamic society is a magnet for businesses to be set up and jobs created. This is good news for the future of jobs in India, especially in smaller cities.