Jo Johnson has a very readable post Engaging India: Demographic dividend or disaster? It focuses on the consequences of not adopting sound economic policies “a good investment climate, in terms of regulation, law and order, physical infrastructure and availability of skilled human capital” in the face of the demographic boom. Quoted below is the part I liked.
… because of strict labour laws, industry is no longer the sink for low-skilled labour that it once was but has gone ultra high tech. … I recently asked Baba Khalyani, … to explain why employment elasticities continue to decline in Indian manufacturing. “Manufacturing jobs will get created but it will not be like before, when unskilled labourers from rural areas got work,” he said. “What makes Indian manufacturing competitive today is technology, not cheap labour. We tried it the other way around before and it didn’t work.” India will need to create jobs in large-scale, labour-intensive manufacturing to stop … protest movements from turning into something more serious. Only when there are massive Chinese-style factories making Barbies, Kickers and Gap shirts for a global market will there be jobs for those potentially otherwise tempted by extremism. Yet to get there will require the government to relax labour laws that penalise large scale manufacturing and that force companies to use expensive labour-substituting technology rather than the cheap manpower that India has in abundance.”
Ever heard of the Law of unintended consequences?