India’s labor force continues to fall behind China’s, despite having the world’s largest population, according to Oxford Economics. The labor force participation rate in India is only at 51%, trailing China by 25 percentage points. Oxford predicts that India will continue to have a smaller labor force until the late 2040s, unless it achieves a participation rate of over 70% by 2030. While a larger proportion of India’s population is of working age, only 51% of them are part of the labor force, compared to 76% in China. India’s population is estimated to peak at 1.7 billion in the mid-2060s, while China’s population would decline to 1.1 billion by then.
Another significant issue in India is the low participation of women in the labor force. While China has a female labor force of 71%, women make up only 25% of India’s workforce. This figure is even lower than in poorer economies such as Pakistan and Bangladesh. In comparison, developing nations in the region with smaller economies, such as Indonesia, Malaysia, Laos, Thailand, and Vietnam, have higher percentages of female workers. This gender disparity poses a challenge for India’s economic growth and development.
Apart from low labor force participation, India faces challenges in terms of education and healthcare standards that affect the productivity of its workforce. Oxford Economics attributes this to India’s lower average human capital levels, defined by education and health outcomes, compared to China and its regional peers. India’s literacy rate lags behind China by 97%, and the quality of education remains weak, particularly in rural areas. Additionally, India’s life expectancy and doctor-to-population ratio are lower compared to China, indicating the need for improvement in healthcare. Raising funding for education and healthcare is crucial to address these issues and enhance India’s labor force productivity. Currently, education spending and healthcare expenditure in India are below the government’s targets and lag behind other countries.