India must focus on education and infra for growth: Moody's report

Population cannot be the only redeeming strength of countries in South and Southeast Asia, including India, and they would need to focus on education and infrastructure to take advantage of the demographic dividend, according to the latest report by Moody's Investor Service.

"The ability of sovereigns to address these challenges will determine the extent to which their large populations can take advantage of opportunities to enhance long-term economic growth," the ratings and research firm said in a report released Monday.

While it appreciated the efforts made by India and the Philippines on infrastructure and governance, the firm noted that considerable work needed to be done on parameters like education and labour force participation. "There remains a considerable gap in the quality of education between Pakistan, Bangladesh and India compared with China and other peers in Southeast Asia, which contributes to labour-force participation imbalances," the report said.

The report pointed out that while the six large economies would contribute to a third of the global population increase over the next two decades and contribute significantly to the global labour pool, it said that "population growth unaccompanied by adequate job creation is likely to exacerbate sovereigns' exposure to social risks.

According to the United Nations, India crossed China this year to become the most populous country in the world, and its population shall take another 40 years to reach its peak. India is expected to have a population of 1.697 billion in 2063.

Moody's underscored the need for addressing gender gaps, as it pointed out that it could provide scope for further economic gains and boost incomes.

The female labour force participation in India was 32.8% in 2021-22, according to the latest annual periodic labour force survey report, much lower than that in China and Southeast Asian economies.

"Enhanced educational outcomes will also mitigate potential job losses from automation, digitalisation and artificial intelligence over the long run, especially for certain segments of the services industry, such as call centres and other business process outsourcing activities in India and the Philippines," the report stated.