Zerodha co-founder Nithin Kamath sees structural unemployment among the youth as one of the most pressing challenges facing the Indian economy. Days before the Budget, Kamath in a post in X says economic growth will remain uneven unless this issue is addressed.
The solution? Kamath believes fostering entrepreneurship in small towns and villages is part of the solution. "VCs will never go to these areas. Which means other wealthy people are the best hope," he wrote.
Kamath hopes the upcoming Budget will address Section 54F, which currently offers tax exemptions on capital gains from the sale of assets if reinvested in residential property. He suggests that including investments in startups within this exemption could mainstream startup investing.
Despite potential misuse, the benefits far outweigh the risks.
Jobs has been a pressing issue for the government. Despite India’s high economic growth rate of 7% and above in recent years, the lack of adequate jobs remains a significant challenge for policymakers. The issue was a focal point during the recent General Elections, and there are high expectations that the upcoming Union Budget will introduce measures to create more employment opportunities.
India has a workforce of 593.7 million, with an estimated 90% in the informal sector, according to World Bank data. The annual Periodic Labour Force Survey (PLFS) shows that the unemployment rate for those aged 15 and above declined to 3.2% in 2022-23 from 6.1% in 2017-18. However, formal employment remains low.
The World Bank has warned that South Asia, including India, may lose its demographic dividend if it fails to create sufficient jobs. Sustaining growth requires increasing employment ratios, particularly in non-agricultural sectors and among women, by removing obstacles to business growth, enhancing openness to international trade, easing labor market restrictions, building human capital, and strengthening women’s rights.
The India Employment Report 2024 highlights that with a large working-age population, India will remain in the potential demographic dividend zone for at least another decade. However, youth unemployment, particularly among those educated to secondary level or above, is a significant issue, with 82.9% of the unemployed population being young people in 2022.