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    Demographic Dividend

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    Ankit

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    Demographic Dividend

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    Ankit
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    Demographic Dividend

    Uploaded by

    Ankit

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    © All Rights Reserved
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    India’s Demographic Dividend

    Context

    India has 62.5% of its population in the age group of 15-59 years which is ever increasing and
    will be at the peak around 2036 when it will reach approximately 65%.
    These population parameters indicate an availability of demographic dividend in India, which
    started in 2005-06 and will last till 2055-56.
    According to Economic Survey 2018-19, India’s Demographic Dividend will peak around 2041,
    when the share of working-age,i.e. 20-59 years, population is expected to hit 59%.

    Demographic Dividend: Definition

    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-age population (15 to 64) is larger than the non-
    working-age share of the population (14 and younger, and 65 and older)".
    With fewer births each year, a country’s working-age population grows larger relative to the young
    dependent population. With more people in the labor force and fewer children to support, a
    country has a window of opportunity for economic growth if the right social and economic
    investments and policies are made in health, education, governance, and the economy.

    Demographic Dividend in India

    India has one of the youngest populations in an aging world. By 2020, the median age in India
    will be just 28, compared to 37 in China and the US, 45 in Western Europe, and 49 in Japan.
    Since 2018, India’s working-age population (people between 15 and 64 years of age) has grown
    larger than the dependant 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.
    This transition happens largely because of a decrease in the total fertility rate (TFR, which is
    the number of births per woman) after the increase in life expectancy gets stabilised.
    A study on demographic dividend in India by United Nations Population Fund (UNFPA) throws up
    two interesting facts.

    The window of demographic dividend opportunity in India is available for five


    decades from 2005-06 to 2055-56, longer than any other country in the world.
    This demographic dividend window is available at different times in different states
    because of differential behaviour of the population parameters.

    Advantages Associated with Demographic Dividend

    Better economic growth brought about by increased economic activities due to higher working
    age population and lower dependent population. It will be channelised in following ways:

    Increased Labour Force that enhances the productivity of the economy.


    Increased fiscal space created by the demographic dividend to divert resources from
    spending on children to investing in physical and human infrastructure.
    Rise in women’s workforce that naturally accompanies a decline in fertility, and which
    can be a new source of growth.
    Increase in savings rate, as the working age also happens to be the prime period for
    saving.
    A massive shift towards a middle-class society, that is, the rise of aspirational class.
    Demographic dividend has historically contributed up to 15 % of the overall growth in
    advanced economies.

    Japan was among the first major economies to experience rapid growth because of
    changing population structure.
    The country’s demographic-dividend phase lasted from 1964 to 2004.
    Rapid industrialisation and urbanisation because of higher number of employment seeking
    population that would force higher economic activities.
    Rise in workforce: With more than 65% of working age population, India will rise as an economic
    superpower, supplying more than half of Asia’s potential workforce over the coming decades.
    Effective policy making: Fine-tuning the planning and implementation of schemes and
    programmes by factoring in population dynamics is likely to yield greater socio-economic impact
    and larger benefits for people.

    Challenges Associated with Demographic Dividend

    Asymmetric demography: The growth in the working-age ratio is likely to be concentrated in


    some of India’s poorest states and the demographic dividend will be fully realized only if India is
    able to create gainful employment opportunities for this working-age population.
    Lack of skills: Most of the new jobs that will be created in the future will be highly skilled and lack
    of skill in Indian workforce is a major challenge. India may not be able to take advantage of the
    opportunities, due to a low human capital base and lack of skills.
    Low human development parameters: India ranks 130 out of 189 countries in UNDP’s Human
    Development Index, which is alarming.Therefore, health and education parameters need to
    be improved substantially to make the Indian workforce efficient and skilled.
    Informal nature of economy in India is another hurdle in reaping the benefits of demographic
    transition in India.
    Jobless growth- There is mounting concern that future growth could turn out to be jobless due to
    de-industrialization, de-globalization, the fourth industrial revolution and technological progress. As
    per the NSSO Periodic Labour Force Survey 2017-18, India’s labour force participation
    rate for the age-group 15-59 years is around 53%, that is, around half of the working
    age population is jobless.

    What needs to be done?

    Building human capital: Investing in people through healthcare, quality education, jobs and
    skills helps build human capital, which is key to supporting economic growth, ending extreme
    poverty, and creating a more inclusive society.

    Skill development to increase employability of young population. India’s labour force


    needs to be empowered with the right skills for the modern economy. Government has
    established the National Skill Development Corporation (NSDC) with the overall
    target of skilling/ up skilling 500 million people in India by 2022..
    Education: Enhancing educational levels by properly investing in primary, secondary and
    higher education. India, which has almost 41% of population below the age of 20 years, can
    reap the demographic dividend only if with a better education system. Also, academic-
    industry collaboration is necessary to synchronise modern industry demands and
    learning levels in academics.

    Establishment of Higher Education Finance Agency (HEFA) is a welcome step


    in this direction.
    Health: Improvement in healthcare infrastructure would ensure higher number of
    productive days for young labourforce, thus increasing the productivity of the economy.
    Success of schemes like Ayushman Bharat and National Health Protection
    scheme (NHPS) is necessary. Also nutrition level in women and children needs
    special care with effective implementation of Integrated Child Development
    (ICDS) programme.
    Job Creation: The nation needs to create ten million jobs per year to absorb the
    addition of young people into the workforce. Promoting businesses’ interests and
    entrepreneurship would help in job creation to provide employment to the large
    labourforce.

    India’s improved ranking in the World Bank’s Ease of Doing Business Index is a
    good sign.
    Schemes like Start-up India and Make in India , if implemented properly, would
    bring the desired result in the near future.
    Urbanisation: The large young and working population in the years to come will migrate to urban
    areas within their own and other States, leading to rapid and large-scale increase in urban
    population. How these migrating people can have access to basic amenities, health and social
    services in urban areas need to be the focus of urban policy planning.
    Schemes such as Smart City Mission and AMRUT needs to be effectively and carefully
    implemented.

    Way Forward

    India is on the right side of demographic transition that provides golden opportunity for its rapid
    socio-economic development, if policymakers align the developmental policies with this
    demographic shift.
    To reap the demographic dividend, proper investment in human capital is needed by focussing on
    education, skill development and healthcare facilities.
    This demographic transition also brings complex challenges with it. If the increased workforce is
    not sufficiently skilled, educated and provided gainful employment, we would be facing
    demographic disaster instead.
    By learning from global approaches from countries such as Japan and Korea and designing
    solutions considering the domestic complexities, we would be able to reap the benefits of
    demographic dividend.

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