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India risks ‘squandering’ demographic dividend: World Bank

Published: 5th Apr, 2024

Context

The World Bank's South Asia regional update, "Jobs for Resilience," highlights concerns regarding the region's utilization of its demographic dividend, particularly focusing on India's employment growth.

1: Dimension- Observations on Employment Trends

  • Slow Job Creation: The South Asia region, including India, is not effectively leveraging its demographic dividend, as job creation lags behind the growth in the working-age population.
  • Unemployment Rate: India, in particular, has witnessed employment growth significantly below the average growth in its working-age population from 2000 to 2023, leading to a decline in the employment ratio.
    • The youth unemployment rate was 45.4 per cent in 2023, according to the Centre for Monitoring Indian Economy, a think-tank.
  • Female employment ratios in many south Asian countries, including India, are among the lowest in the world, at less than 40 per cent.

2: Dimension- Untapped benefits from the demographic dividend

  • Economic growth:Better economic growth is brought about by increased economic activities due to a higher working-age population and lower dependent population thereby increasing labor force along with rising in women workforce.
  • Policy Framing: Effective policy making by strictly implementing schemes and programs for the benefit of the people.
  • Rise in employment: A higher employment-seeking population will lead to the rapid increase of industrialization and urbanization.
  • Increased workforce:The working-age population rising to 65% will increase the workforce.
  • Swelling labour force:India’s labour force is swelling as its baby boomers reach working age. It would boost India’s growth. 
  • Effective diversion of resources: India’s population has the potential to divert resources from spending on irrelevant things to investing in physical and human infrastructure. 
  • Rise in women’s workforce:There is a rise in women’s workforce activity that naturally accompanies a decline in fertility. 
  • Easy accumulation: The fourth is that working ages also happen to be the prime years for savings, which is key to the accumulation of capital and technological innovation. 

3: Dimension- Economic Growth and Employment

  • Despite challenges in employment, India's economy is expected to exhibit robust growth of 7.5% in FY23/24, contributing to the overall strong performance of the South Asian region.
  • However, the region could achieve even higher output growth if the employment rate matched that of other Emerging Market and Developing Economies (EMDEs).

4: Dimension- Approach to seize Demographic Advantage:

  • Upgrading Education Standards: Irrespective of rural or urban settings, the public school system must incorporate skilling, training, and vocational education in line with market demand.
  • Fulfilling Health-Related Requirements: Increasing government spending on health, education, and other social sectors will be crucial to realizing the potential dividend from India’s young demography.
  • Inter-Sectoral Collaborations:Moving forward towards safeguarding the futures of adolescents, it is imperative to put in place mechanisms for better inter-sectoral collaboration.
  • Bridging Gender Gaps in Workforce: New skills and opportunities for women and girls befitting their participation in a 3 trillion-dollar economy are urgently needed. This can be done by:
    • Legally compulsory gender budgeting to analyze gender-disaggregated data and its impact on policies
    • Increasing childcare benefits
    • Boosting tax incentives for part-time work
  • Federal Approach for Diverse States: Inter-ministerial coordination for strategic planning, investment, monitoring, and course correction should be an important feature of this governance arrangement.

Fact Box: India’s demographic dividend

  • India is home to more than 600 million people aged between 18 and 35, with 65% under the age of 35. 
  • India's demographic dividend is expected to persist at least until 2055–56 and will peak around 2041, when the share of the working-age population — 20–59 years — is expected to hit 59%.

UPSC PYQ

Q: The nature of economic growth in India is described as jobless growth. Do you agree with this view? Give arguments in favour of your answer. (UPSC 2015)

Q: While we found India’s demographic dividend

Q2: While we flaunt India’s demographic dividend, we ignore dropping rates of employability. What are we missing doing so? Where will the jobs that India desperately needs come from? Explain. (UPSC 2014)

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