Is India Ready to Reap the Benefits of Demographic Dividend?

India is seeing growth of its working age population and this graph is likely to continue till 2055. The second most populous nation in the world also faces a number of challenges on this front. Will India manage its demographic dividend successfully or let it wither away?

By Vinay Kumar

Special Feature Archive

India is set to become the world’s most populous country in 2023, overtaking China which is teeming with 1.4 billion people, according to figures released by the United Nations this July. It has spurred the debate if India can leverage its population as its strength or overpopulation will become its weakness? Population growth is projected to be uneven across the globe and it also indicates that the global population of people aged 65 years or above is projected to increase from 10 per cent to 16 per cent in 2050.

With a large chunk of India’s population falling under a rather young bracket which means availability of a strong work force across several sectors, India is being described as the next big economic growth story after China. The reason mainly for this is the fact that India is home to its young population which has kindled hope that it will lead to a higher economic growth which is often referred as demographic dividend.

The working age population in India in 2018 started growing larger than the country’s dependent population which is seen as children below the age of 14 years and adults above 65 years of age. It is likely that this graph will continue until 2055. The crucial question remains: Will India manage this gain through its growing population in this bracket?

If we look at some of the major Asian economies like Japan, South Korea and China, it would be clear that they have been able to benefit from the rise in their working population. These countries managed to engage their population in productive employment, resulting in periods of high growth. The somewhat similar trend gives rise to hope that India will also be able to reap similar demographic dividends.

Global population of people aged 65 years or above is projected to increase from 10 per cent to 16 per cent in 2050

With a population of more than 1.3 billion, India is the world’s largest democracy. According to a report of the World Bank, India’s integration into the global economy has been accompanied by economic growth and India has now emerged as a global player.

In an address last year, Prime Minister Narendra Modi had said that data and demographic dividend combined with India’s proven tech prowess presents an opportunity for the country. He exuded confidence that this decade will be “India’s techade.’’ Prime Minister Modi has invoked the term“demographic dividend’’ often in his speeches in the recent past. This year too, he said that it was critical to prepare the ‘demographic dividend’ of the country as per the demands of the changing job roles.  Similar sentiments have been echoed by others in the Union Government, saying India’s population is an asset to the economy  as it is linked to the scale of a market.

This poses another question: If India is prepared to realise this potential , if there are right conditions for availing this opportunity?

The Confederation of Indian Industry (CII), in a report this year, cautioned that unless enough jobs are created and skilled workforce is available to perform these jobs, the demographic dividend will become a liability for the country.

Since the 2000s, India has made significant progress in reducing absolute poverty. Between 2011 and 2015, more than 90 million people were lifted out of extreme poverty. The report noted that the Covid-19 pandemic led India’s economy into a contraction of 7.3 per cent in 2021, despite well-crafted fiscal and monetary policy support. Growth is likely to be close to the lower bound of the range of 7.5 to 12.5 percent but will still put India among the fastest growing economies in the world.

India’s integration into the global economy has been accompanied by economic growth and India has now emerged as a global player

India has 62.5 per cent of the population in the age group of 15 to 59 years which is increasing and it will peak around 2036 when it will reach approximately 65 per cent. This points to the demographic dividend in India that is expected to last till 2055 and government figures show that India’s demographic dividend will peak around 2041 when the share of the working population is likely to reach 59 per cent.

According to 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 population (15 to 64 years) is larger than the non-working-age share of the population (14 and younger and 65 and older).’’

A study on the demographic dividend in India by UNFPA shows that the window of opportunity will be available for five decades which is longer than any other country in the world and this window will be available at different times in different states because of the differential behaviour of the population parameters.

While there are advantages associated with demographic dividend, it also poses a number of challenges.

The advantages focus on better economic growth by increased economic activities, increased labour force, increased space in the fiscal arena, rise in women’s workforce, increase in savings rate and shift towards a larger middle-class society that also happens to be an aspirational class.

These advantages may translate into rapid urbanisation and industrialisation, a rise in the workforce which may become more than 65 per cent of the working age population.

At the same time, it presents a number of challenges as well. Demographic dividend may lead to asymmetric demography and its potential will be fully realized only if India is able to create gainful employment opportunities for this working age population. New jobs will present a serious challenge to the lack of skill in the workforce of the country and will require major focus on tackling the informal nature of the economy. There is also growing concern that the growth in the coming years could well turn out to be jobless.

India will need to invest in people through healthcare, quality education, jobs and skills that will help build human capital

India will need to invest in people through healthcare, quality education, jobs and skills that will help build human capital. The National Skill Development Corporation (NSDC) has set a target of upskilling 500 million people in India by 2022. In the field of education, it will be worthwhile in synchronising modern industry demands with learning levels in academic institutions and forge academic-industry collaboration.

India will need to create more than 10 million jobs each year to mitigate the addition of young people into the workforce. It can be done by encouraging the culture of entrepreneurship. Migration of the young working population will increase, leading to large-scale urbanisation. Urban policy planning will need to be carefully crafted to provide people living in such areas access to amenities like healthcare, education, skill development and social services.

India’s improved ranking in the World Bank’s Ease of Doing Business Index is a welcome sign and the new schemes like Start-Up India and Make In India can prove to be game changers, if implemented properly.

Policymakers will need to align the developmental policies with the demographic shift and to reap the demographic dividend, India will need to invest in human capital by sharply focussing on education, skill development and healthcare facilities.

If complex challenges are to be met successfully, India will need to sufficiently skill, educate and provide gainful employment to its workforce. If the country fails to accomplish this, it will be on the verge of facing demographic disaster instead.

India can also learn from best global practices from countries like Japan and South Korea and come up with solutions considering its domestic landscape and a complex scenario.

-The writer is a New Delhi based Senior Journalist. The views expressed are personal and do not necessarily reflect the views of Raksha Anirveda