The Future of India in the World Economy Comments by Johannes Jütting OECD Development Centre Paris, 22 June, 2007

Focus on two points: I. Human capital challenge: Urgent need to improve gender equality II. Employment challenge: Moving beyond the conventional agenda

I) Gender equality - the status quo India: low ranking in cross-country comparisons UNDP – Gender-related Development Index: 96 (out of 136) World Economic Forum - Gender Gap Index: 98 (out of 115) OECD - Social Institutions and Gender Index:106 (out of 117) Poor performance in key areas: Health – Education - Political participation - Employment

Maternal Mortality Ratio (per 100,000 live births) Share of women in wage employment in the non-agricultural sector (in % of total) Women in Parliament (as % of total) Source: Gender, Institutions and Development Data Base (2007), OECD Ratio of female to male adult literacy (>15 years)

What are the causes for persisting gender inequality? Is there a lack of funds? – Maybe, but… Unequal distribution of funds between men and women Better progress in some states – regardless of income level Is there a lack of political pressure? - Maybe, but… Big improvements (ex. quotas at local level for women) Active civil society as watch-dog for women’s rights So what about social norms and traditions?

Early Marriage (% of girls between 15 and 19 years of age who are currently married, divorced or widowed) Inheritance Practices (male heirs are favoured = 1) Violence Against Women (absence of any legislation on violence against women = 1) Women‘s Access to Land (land ownership is not possible for women = 1) Source: Gender, Institutions and Development Data Base (2007), OECD

Implications Social institutions matter – more discussion needed how to change them If gender inequality persists, then: –Low probability of achieving the MDG’s –Shortage of skilled labour –Slow down of economic growth

II) Conventional employment agenda 1)Growth creates jobs  poverty reduction 2)Growth will reduce the size of informal employment 3)All informal employment is bad (formal employment is good) 4)Agricultural sector not an engine for creating jobs

1) Growth and poverty reduction? Impressive growth rates, but not very “pro-poor”  Poverty impact limited  From 1987 to 2000: Increase of GDP p.c. from to (constant 2000 prices) Decrease headcount poverty ratio (1$ a day) from 43% to 36%  Low employment elasticity of growth

2) Informal employment on decline? Source: Unni 2002  High share of informal employment has persisted  Informal sector contributes relatively little to GDP

3) Informal bad, formal good? Informal employment always bad? –Informal workers rarely covered by social security systems –Often low productivity –But, very large differences within the sector: rural – urban; self-employed – wage employed, migrant – those who stay etc. Formal employment always good? –Casualisation of working conditions –“Benefits” often do not materialize

4) Agriculture and jobs Agriculture – no engine for jobs: Low absorption capacity of labour; creating employment possibilities elsewhere e.g. manufacturing; adapting legal framework and create conducive business environment Agriculture – employment creating potential Main sector for poverty reduction; improving productivity and off-farm employment opportunities (linkages); public policies needed like recently enacted employment guarantee scheme and heavy infrastructure investments