The article explores the various dimensions of India's demographic dividend. It discusses how the demographic dividend can spur economic growth in India, the hurdles and the way ahead.
INTRODUCTION
India has one of the youngest populations in an aging world. Since 2018, India’s working-age population (people between 15 and 64 years of age) has grown larger than the dependent population (children aged 14 or below as well as people above 65 years of age). As per the data of the World Bank, in 2019, 67% of India’s population belonged to the working-age group. This bulge in the working-age population is predicted to last till 2055, or 37 years from its beginning in 2018. To put it simply, according to the United Nations Population Fund (UNFPA), demographic dividend means "the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working age share of the population (14 and younger, and 65 and older)".
The main cause of the demographic dividend is a decrease in the total fertility rate (TFR, which gives the number of births per woman) after the increase in life expectancy gets stabilized. In India, the TFR is approximately 2.2 which is lower than the global average of about 2.4. Due to lesser births, fewer young dependents get added to the population and a larger working-age population comes into existence. With an increased workforce and a smaller number of people to support, the country can achieve rapid economic growth. At the same time, it is important to ensure that India’s demographic dividend does not turn into a liability. This is possible when the right focus is placed on skill development of the youth and necessary investments are made in education, health and employment.
GOLDEN PERIOD FOR GROWTH
Demographic dividend, historically, has contributed up to 15 % of the overall growth in advanced economies. This is because a large working-age population offers greater opportunities for productivity. Demographic dividend would, thus, help India achieve economic growth. Also, in the future, there may be a shortage of workforce in foreign countries because of the high median age of their population. Hence, India, with one of the youngest populations in the world, may even fulfill the demand for labour abroad.
Another aspect is that because there are fewer children to care for, some of the resources initially used for child care can be diverted to infrastructure and human capital formation. The smaller number of dependents would also encourage women to move out of the house and take up jobs, improving the female labour participation rate (LFPR). As there are fewer people to support, the phase of demographic dividend is also a period of saving, which is likely to fuel investment in the economy.
OBSTACLES TO OVERCOME
India also faces many challenges in its path to make the most of its demographic dividend. The main challenges that would be discussed in this article are the differential demographic dividend across states, lack of employable skills, a low level of human development, the paucity of suitable jobs, and unemployment.
The first obstacle is the differential demographic dividend across states in India. The existing body of research postulates that the demographic dividend window is available at different times in different states. The root cause of this is the varying TFR statistics across states. For example, while Delhi and Tamil Nadu have a higher proportion of working-age and ageing population, Bihar, Odisha and Uttar Pradesh have a fundamentally young population. There is also the issue of the younger population of the country being concentrated in the poorer states. A pan-India policy to utilize the demographic dividend may be rendered ineffective on account of these differences, if it does not take into account the dynamic parameters and concerns as may vary according to the region.
The second issue is the lack of employable skills in the workforce. It has been found time and again that a sizeable chunk of the youth is unemployable owing to the lack of applicable skills. In the future, jobs can only be expected to become more specialized. There is a need to modernize curricula and incorporate practical and job-oriented skills into classroom teaching.
The low human development parameters is a third challenge which needs to be tackled. India has a rank of 131 out of 189 countries on the United Nations’ Human Development Index. Several reports have indicated that children do not have basic literacy and numeracy skills despite years of schooling. The health infrastructure also needs to be upgraded to ensure a healthy workforce and to ensure the development of human capital.
The fourth obstacle is the unavailability of suitable jobs and the problem of unemployment. Most of the jobs available in the Indian economy are in the informal sector. Moreover, due to the fourth Industrial Revolution, there are predictions that many jobs would become redundant in the future. This would further reduce the number of jobs available. Another pressing concern is unemployment. Around 12.2 crore jobs have been lost due to the coronavirus pandemic. According to the Centre for Monitoring Indian Economy data, the unemployment rate in India rose from 7.87% in June, 2019 to 9.06% in December, 2020. The youth who were supposed to join the workforce and contribute to economic growth have, instead, been forced to risk destitution.
WAY FORWARD : REAPING THE BENEFITS
The need of the hour is to focus on building human capital. We need to invest in skill development, quality education and health facilities and creating employment opportunities.
Skill development is required to enhance the employability of the Indian youth. In this regard, the government had established the National Skill Development Corporation (NSDC) and launched the ‘Skill India’ mission. There should also be a greater focus on industry-academia collaborations in order to familiarize students with the trends and demands of the job market.
Secondly, quality education and healthcare services are a must. The government education on expenditure could be increased from 4.6% of the GDP to 6% of the GDP as per the recommendations of the National Education Commission of 1964-66. The government should spend on all levels of education—be it primary, secondary or higher education—to improve outcomes. The new National Education Policy (NEP) of 2020 and the establishment of the Higher Education Financing Agency (HEFA) are a welcome step in this direction. Furthermore, improvements in the health infrastructure would guarantee more days of productive work. Schemes such as Ayushman Bharat and National Health Protection Scheme (NHPS) can also serve as aides.
Job creation is crucial. With millions of people being added to the working-age population annually, there are not enough job opportunities. This requires quick and effective short-term and long-term policy interventions. Entrepreneurship should be encouraged to convert job seekers into job creators. Schemes like Start-up India, Stand Up India and Make in India would yield desired results on this front, if implemented in letter and spirit.
Finally, a differential demographic dividend calls for tailored and targeted policies to suit the needs of different states instead of an all-India approach. India could also learn from the strategies of countries like Japan which have made the most of their period of the demographic dividend. An often overlooked aspect is that India would have a sizeable elderly population, too, when this phase of demographic dividend is over and ought to look towards creating infrastructure for geriatric care and other support mechanisms.
CONCLUSION
By leveraging the vast demographic dividend in India, we can move closer to the target of becoming a US$5 trillion economy and emerging as ‘Atmanirbhar Bharat’. We must cross all hurdles to prevent this demographic dividend from turning into a demographic disaster. Indeed, the demographic dividend, if utilized properly, could herald an era of rapid economic growth in India. With the right policies focusing on education, healthcare, skill development and employment, India can definitely emerge as a global superpower.
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