The International Labour Organisation (ILO) believes India is likely to weather the latest global slowdown better than most countries, provided it ensures rising income levels for the working class and enough jobs for a growing working-age population.
According to the annual report on global employment by the ILO, "The main challenge is not unemployment, but rather the high degree of informality that persists despite strong growth."
"The robust growth witnessed in the South Asian region was driven largely by India and was largely due to the rapid rise in labour productivity, rather than an expansion in employment," the report, titled, 'Global Employment Trends 2012: Preventing a Deeper Jobs Crisis', said.
This situation is prominent in India, which accounts for 74 per cent of the South Asia region's labour force.
In India, total employment grew by only 0.1 per cent over the five years to 2009-10 -- from 457.9 million in 2004-05 to 458.4 million in 2009/10 -- while labour productivity grew by more than 34 per cent over this period.
Labour productivity is the amount of goods and services that a worker produces in a given amount of time.
A major reason for the slow growth in employment in recent years is the fall in female participation in the labour force. This has been most pronounced in India, where participation of women in labour activities fell from 49.4 per cent in 2004-05 to 37.8 per cent in 2009-10 for rural females and from 24.4 per cent to 19.4 per cent for urban females.
This drop in participation can only partly be explained by the strong increase in enrollment in education, because it has been evident across all age groups, the report added.
The main labour market challenges in South Asia, including India, are two-fold and consist of achieving the twin goals of increasing labour productivity, to ensure incomes are rising and poverty is falling, and creation of enough jobs for a growing working-age population, which is expanding by around 2 per cent each year, the ILO said.
With almost 60 per cent of the population in South Asia under the age of 30, governments should take advantage of this demographic dividend, the report said.
The global uncertainty stemming from the euro area sovereign debt crisis and continuing weakness of the United States' economy has negative implications for all countries, including those in the South Asia region.
"Overall, the worsening economic conditions will make it more challenging for the South Asia region