Demographic dividend as defined by the United Nations Population Fund 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 is larger than the non-working-age share of the population.”
India sits at the helm of this demographic dividend because half of India’s current population of over 1.2 billion is under the age of 26 and the median age in India by 2020 is projected to be 29, making it the youngest country in the world. This makes India’s demographics envy of the world.
As populations in countries such as China, US, and Japan is getting older, India’s population is getting younger. Since 2018, India’s working-age population has grown larger than the dependent population — children aged 14 or below as well as people above 65 years of age. This bulge in the working-age population is going to last till 2055, or 37 years from its beginning.
India’s working-age population is now increasing because of rapidly declining birth and death rates. India’s age dependency ratio, the ratio of dependents to the working-age population, is expected to only start rising in 2040, as per UN estimates.
This presents a golden opportunity for economic growth. It is, however, important to note that this change in population structure alone cannot push growth. There are many other factors.
Thus, we analyse how to reap India’s demographic dividend.
Edited excerpts from the debate raised in the form of questions.
How will India’s demographic dividend play out in over the next 30-40 years?
According to the World Population Prospects 2019 report released by United Nations (UN)
- India is set to overtake China as the most populous country by 2027 and will have almost 1.64 billion inhabitants by 2050.
- India is expected to add 273 million people by 2050, which will be the largest national increase in the world.
- India, with 1.37 billion, is one of the most populous countries of the world comprising 18 per cent of the global total in 2019.
- While India may have the highest absolute increase in numbers, its rate of growth is slowing and currently stands at around 1.02 %.
- India’s total fertility rate (TFR) is declining. It is now 2.2 per woman, nearing the replacement rate of 2.1.
- Since 2018, India’s working-age population has grown larger than the dependent population. This bulge in the working-age population is going to last till 2055, or 37 years from its beginning.
How is demographic dividend significant for the economic growth of a country?
Demographic dividend with a proportionately large young and working-age population has the potential to spur the economic growth in the following ways –
- Growth: The increase in the number of working population in the economy increases the production and the output thereby increasing the GDP of the country.
- Tax Revenue: This increases the tax base and the tax collections of the government. Thus, government can enhance its investment and increase its spending on public services and goods.
- Increased Demand: The aggregate demand in the economy increases due to consumer spending. The increased working age population spends on buying homes, cars, consumer durables.
- Savings: This population also saves money. It leads to higher savings and therefore higher investments in the economy.
- Efficient Expenditure: Increased working age population will enhance the fiscal space to divert resources from spending on dependant population to investing in physical and human infrastructure.
- Women Empowerment: It would lead to rise in women’s workforce that naturally accompanies a decline in fertility, and thereby creating a new source of growth.
However, the growth benefit of a demographic dividend is not automatic. A lot depends on the fact that we are able to properly utilise this working age population.
How do we reap India’s demographic dividend?
To reap the demographic dividend, we must ensure that this working age population is healthy, is educated, is skilled and there are employment opportunities available for them in the economy
- India currently has a poor education system from bottom to top. India's literacy rate, after 70 years of independence, is around 74 per cent.
- The largest part of India's schools is of poor infrastructural quality and India’s teachers are inadequately prepared, weakly motivated, poorly paid, and frequently absent.
- The overall quality of the higher education system is well below global standards and industries complain of unemployable graduates. Also, Gross Enrolment Ratio is just around in 2016-17 in higher education sector.
- Upgrading physical and social infrastructure and enhancing educational access to marginalized sections to improve educational quality.
- The universities should take up more research, publish research papers and bring in more innovative technologies.
SKILL DEVELOPMENT AND EMPLOYMENT OPPORTUNITIES
- India is not creating enough jobs to employ all the youth that are joining the working population. Around 25 million young people join the workforce every year, but only around 7 million jobs are created for them.
- National Sample Survey Office (NSSO) notes that unemployment in 2017, at 6.1 per cent, was at a 45-year high.
- Most of the youth joining the workforce in India have very low levels of skill. By 2022, we will have 100 million people unable to get jobs due to lack of skills
- Government and industry must create pull factors to attract workers to get vocational training to create human capital.
- The government should include a minimum percentage of certified skilled work forces in the tendering process of every manpower intensive project.
- Industry can enforce that ancillary service providers like drivers, housekeeping and security staff have skill certification.
- Introduction of fixed contract system, formalization of economy, encouraging entrepreneurship among youth can generate employments.
- Special packages for labour intensive industries such as food processing, leather and footwear, wood manufacturers and furniture, textiles and apparel and garments.
- Removing the social barriers for women’s entry into labour force.
- Despite impressive economic progress, nearly 20% Indian children under five are wasted, 38% stunted and 35% underweight. In addition, nearly half of women are anaemic.
- A number of non-communicable diseases is inflicting damage to health and thus economy.
- Currently, cardiovascular diseases, diabetes, cancers, chronic respiratory disorders and mental illness collectively contribute to 60 per cent of deaths and are projected to rise sharply by 2030.
- According to the World Economic Forum, India stands to lose $4.58 trillion between 2012 and 2030 due to these non-communicable diseases.
- Major cause for concern is that nearly half of the deaths and disability related to them occur before the age of 65.
- Robust health system with focus on primary health services and community-based management of severe malnutrition need to be created.
- People can be empowered with information and enabled by technologies to protect, preserve and promote their health.
- Investing in large-scale skilled health workforce development can provide millions of jobs to young people
- Public financing of health must go up to at least three per cent by 2022. This will help reduce out-of-pocket expenditure to less than 50 per cent.
- The female labour force participation has had a decadal fall from 36.7 per cent in 2005 to 26 per cent in 2018, with 95% women employed in the unorganised sector or in unpaid word.
- Lack of education, access to quality education and digital divide limits women from gaining employable skill sets and entering the workforce or establishing an enterprise.
- Irrespective of employment category (casual and regular/salaried), organised or unorganised sector, and location (urban and rural), women workers in India are paid a lower wage rate.
- Improving access to and relevance of education and training programs and skills development.
- Access to child care, maternity protection, and provision of safe and accessible transport.
What steps have already been taken by the government in the short term say in the last 5 years so that we can reap the benefits of demographic dividend?
Many initiatives have been taken in the last 5 years to reap demographic dividend:
- Social security structure in terms of Ayushman Bharat scheme, pension scheme for the unorganised, Krishi Samman Nidhi, expansion of scholarships will improve the human capital in the longer run.
- There has been immense focus on vocational training and skill development via PM Kaushal Vikas Yojana and Skill India Mission. Acquired skills can also be certified. National Service Portal was launched provides a nation-wide online platform for jobseekers and employers for job matching.
- Fostering innovation through Atal Innovation Mission and improving employability through SETU (Self-employment and talent utilisation). Promoting entrepreneurship through schemes like Startup India, Standup India etc.
- Educational sector initiatives like RTE Act, 2009 and Sarva Siksha Abhiyan aims for improvements in school infrastructure, curricular and assessment reforms, improved teaching and learning resulting in better learning outcomes.
- Schemes like Rashtriya Uchchatar Shiksha Abhiyan (RUSA), Global Initiative for Academics Network (GIAN), Impacting Research, Innovation & Technology (IMPRINT) and Study Webs of Active-Learning for Young Aspiring Minds (SWAYAM) are being implemented to improve quality of higher education.
- Government has taken various steps to increase female labour participation rate:
- Enactment of the Maternity Benefit (Amendment) Act, 2017 to provides for enhancement in paid maternity leave and provisions for mandatory crèche facility in establishments.
- Issue of an advisory to the States under the Factories Act, 1948 for permitting women workers in the night shifts with adequate safety measures.
- Government is providing training to women through a network of Women Industrial Training institutes, National Vocational Training Institutes and Regional Vocational Training Institutes to enhance the employability of female workers.
What are some of the other barriers we need to be wary of going forward?
Apart from the issues mentioned above, there are several other structural barriers that need to be addressed.
- Ageing Population - India’s total fertility rate (TFR) is declining. It is now 2.2 per woman, nearing the replacement rate of 2.1.
- Higher education, increased mobility, late marriage, financially independent women and overall prosperity are all contributing to a falling TFR.
- It goes below 2 in both urban and rural areas, where girls complete schooling and reduces further as they pass college.
- As more cities come up, people move for jobs and employment tenure gets shorter, TFR may fall further.
Thus, government needs to confront this challenge as India may not remain young for long. Healthy life expectancy at the age of 60 now stands at 12.9 years (12.5 years for males; 13.3 years for females)- life expectancy for both males and females is likely to continue rising.
- The government needs to engineer its policies to harness the demographic dividend and to take care of higher medical costs as the population ages and productivity shrinks.
- As more people live away from their parents, India will also need to have an affordable social security system that provides pension to the elderly and takes care of their daily needs and medical expenses.
- Increasing the retirement age for both men and women.
- Technological Divide – High inequality in terms of access to quality basic and technical education. Higher education institutions like IITs provided technical education to very few people while majority were deprived even the basic education.
- It imposes several constraints on person from a poor background aiming to transform his status to higher productivity areas. For ex-
- High constraints on trying to move from agricultural to industrial sector
- Unable to match required high skills like robotics, artificial intelligence in this era of 4th Industrial Revolution demands.
Suggestions – This technological divide needs to be bridged. We need to rethink and restructure the entire process of education and skill development in India so as to cope up with upcoming technological disruption.
- Inter-States and Rural-Urban Inequality - When we look at the sub-national picture, it could be said that the demographic transition in India is staggered.
- Some states have very low total fertility rates, of, say, 1.6 children per woman, while there are other states that are hovering around the replacement level of 2.1
- There are different sets of states. Some states like Kerala and Tamil Nadu opened their demographic dividend earlier. States like Andhra Pradesh and Delhi are opening up while states like Bihar and U.P are yet to open up.
- When all the states in India are mapped in terms of fertility levels, one sees a predominantly youthful north and a maturing south and west.
India will enjoy a longer span of demographic dividend because, as the window closes in some states, it will open in other states. Thus –
- Socio-economic development policy planning must be done according to the age and sex structures in states or a set of states.
- The focus in the states where the window is closing soon will have to be on ageing and migrant-friendly policies and programmes.
- The focus in the states where the window is open will have to be on empowering girls and women, provisioning of health, education and skill development for young people, and employment generation.
- Focus in the states where the window is yet to open will have to be threefold—addressing harmful practices such as child marriage, access to quality sexual and reproductive health services and family planning services to all, and provisioning of health, education, life and vocational skills to all the young people.
Do we need to focus on any sector specifically in the shorter and longer term to tackle the employment issue?
- Short term - Expand the employment in the health, education and policing services. There’s a huge shortage of personnel in these sectors.
- Medium term - Expand the manufacturing base which we have failed to do so. We are the only major economy which has missed the industrial revolution in the real sense.
- Long term
- Focus more on the technological aspect. The technological disruption due to emerging technologies like robotics, artificial intelligence, blockchain will render a large number of jobs absolute.
- Need to tackle inequality and emphasize on inter and intra-generational upward mobility. Marginalized people should be able to have access to opportunities in the various sectors and increase their status by smooth transition to productive sectors.
We are set to overtake China in the next 8 years as the most populous country in the world as per UN report. How do we prepare for that?
- Emphasize on inclusive development taking along both urban and rural youth and all the marginalised sections which so far have been left out.
- Majority of the migrants in search of better opportunities move to urban societies and reside in slums depriving them of basic sanitation services. This leads to spreading of diseases affecting human health and productivity.
- So we need to provide proper urban infrastructure to migrant population. So we need to have a proper model for building social and physical infrastructure.
- Address not only the economic opportunities but also focus on social development and ensure rapid expansion of social security schemes especially for ageing population.
- Ensure quality access of reproductive health services to youth and adults. Increasing marriage age can help control population explosion.
- Women should be at the centre of any policy development to eliminate gender divide and ensure effective participation in the development of the section that forms half chunk of the population.
What is the best way forward?
- Government needs to intervene in the education sector on a similar scale as it did in health sector with the Ayushman Bharat.
- Adolescent and young population needs to be taken care of and they should be provided with contraception services to delay pregnancy.
- Social determinants like marriage age and son preference need to be addressed.
- We need to take care of elderly as well as life expectancy is increasing. Their health, housing and other basic needs to be taken care of.
What we spoke of as ‘Population burden’ in the 1990s became ‘demographic dividend’ in no time. However, the idea of demographic dividend must not be misconstrued that the population growth is good for development. Demographic dividend tries to reinterpret the relationship between population and development highlighting the virtue of fertility decline and the consequent demographic transition.
India can accelerate its economic growth and mitigate the unemployment problem that is forecast for the coming decades by seizing a huge opportunity provided to it by a combination of global developments in agriculture, industry, trade, IT and demographics. Many agencies in India need to act now to prepare to capitalise on this opportunity. Even in a pessimistic scenario of global economic growth, the gains for India are very large. Therefore, we should not waste further time debating the precise size of this opportunity. Rather, we must move to action.