India, poised on the cusp of economic transformation, faces a critical challenge: its burgeoning youth population is entering the workforce at a pace that far exceeds the growth of jobs. The unemployment rate of India’s youth – aged between 15 and 24 – was at 45.4% according to the latest CMIE reports. This mismatch highlights an urgent need for innovative solutions to harness the potential of India’s young demographic, ensuring sustainable economic development and progress towards the Sustainable Development Goals (SDGs). Fostering youth entrepreneurship emerges as a key strategy in addressing this challenge, with additional emphasis on promoting entrepreneurship in rural areas.
Understanding the Employment Gap
India’s demographic dividend presents a unique opportunity and challenge. With more than 65% of its population under the age of 35, India boasts one of the world’s largest youth populations. However, this demographic advantage is under threat due to the slow pace of job creation in the country. According to the Centre for Monitoring Indian Economy (CMIE), India’s rural labour force participation rate fell further to 39.5% in 2022-23 from already a low of 40.1% in 2021-22. This is much lower than the global estimate of 60%. Other countries in the Asian region fare much better with Indonesia at 67% and South Korea at 63%. Further, according to CMIE, the unemployment rate in India as of 2023 hovers around 7-8%, with youth unemployment significantly higher.
The UN estimated that India’s working-age population (aged between 15 and 64) at 960 million in 2022. To match the labour force participation of global 60% and lower the unemployment rates in the country comparable to other countries in the region, India needs to generate at least 100 million additional jobs to provide opportunities for the young people entering the workforce every year.
The Case for Youth Entrepreneurship
Entrepreneurship, especially among the youth, stands out as a potent solution to this challenge. By empowering young individuals to create their own ventures, not only do we tackle the issue of unemployment head-on, but we also lay the groundwork for fostering innovation, driving economic growth, and contributing to the SDGs. Youth entrepreneurship encourages self-reliance, creates job opportunities for others, and addresses societal needs through innovative solutions.
Entrepreneurial ventures are vital for generating employment, with small and medium-sized enterprises (SMEs) playing a crucial role in most economies. According to the World Bank, SMEs account for about 90% of businesses and more than 50% of employment worldwide. In India, fostering youth entrepreneurship can significantly contribute to filling the employment gap by creating jobs not only for entrepreneurs but also for others, thus amplifying the impact on the economy.
Recognizing the importance of entrepreneurship, the Indian government has launched several initiatives, such as Startup India and the Pradhan Mantri Mudra Yojana, PMEGP, Pradhan Mantri Vishwakarma Yojna, aimed at fostering a conducive ecosystem for young entrepreneurs. These programs offer financial assistance, mentorship, and support in navigating the bureaucratic landscape, thereby encouraging more young individuals to embark on entrepreneurial journeys.
Overcoming Barriers
Despite these efforts, young entrepreneurs face several hurdles, including access to capital, mentorship, and other business development services. Addressing these challenges through targeted policy interventions, increased access to venture capital, and providing platforms for networking and mentorship can significantly boost youth entrepreneurship.
The approach for scaling entrepreneurship in rural India would require a comprehensive and collaborative framework, aimed at empowering rural entrepreneurs through a robust district level ecosystem and sub block-level support architecture. This ecosystem encompasses special nudge units within the government, district level collaborative platforms for stakeholder coordination, and digital platforms for providing business development services such as training, mentoring, and market linkage to rural entrepreneurs. Additionally, the mapping of high-potential pathways and unlocking finance through partnerships with financial institutions are pivotal components that address ecosystem gaps and facilitate access to essential resources for rural entrepreneurs.
The promotion of youth entrepreneurship stands out as a critical strategy for harnessing the potential of India’s young workforce. As the country navigates the challenges of job creation in the formal sector, empowering young entrepreneurs offers a path to economic resilience, innovation, and sustainable development. By creating an ecosystem that nurtures and supports young innovators, India can ensure that its demographic dividend translates into tangible economic and social gains, securing its position as a leading economy on the global stage.
Views of the author are personal and do not necessarily represent the website’s views.
Neeraj Ahuja is part of the senior leadership team at Transform Rural India. Neeraj leads the mass rural entrepreneurship program and Global Opportunity Youth Network program in TRI to catalyze economic opportunities for rural youth at scale. Neeraj has been a part of the Prime Minister’s Fellows Program before joining TRI where he worked closely with community and district administration in one of the left-wing extremism-affected districts in India. Neeraj was also part of the ICICI Fellowship where he worked closely with Gram Panchayats to bring accountability and transparency to the governance and functioning of Panchayats. Neeraj has a post-graduate degree in Development Practice from the Tata Institute of Social Sciences, Mumbai, and Bachelor in Electronics and Communication Engineering from RGTU, Bhopal.
Neeraj Ahuja is part of the senior leadership team at Transform Rural India. Neeraj leads the mass rural entrepreneurship program and Global Opportunity Youth Network program in TRI to catalyze economic opportunities for rural youth at scale. Neeraj has been a part of the Prime Minister’s Fellows Program before joining TRI where he worked closely with community and district administration in one of the left-wing extremism-affected districts in India. Neeraj was also part of the ICICI Fellowship where he worked closely with Gram Panchayats to bring accountability and transparency to the governance and functioning of Panchayats. Neeraj has a post-graduate degree in Development Practice from the Tata Institute of Social Sciences, Mumbai, and Bachelor in Electronics and Communication Engineering from RGTU, Bhopal.
