POV: India’s Young Population – Demographic Dividend or Demographic Disaster?

An Overview

In 2022, the world population reached the mark of eight billion and is expected to grow by around 0.88% in 2023. Though the population is increasing in absolute terms, whether it would provide economic opportunities or disadvantages to the economy, depends upon which phase of demographic transition they are in.
India had its baby boom experience between 1980 to 1994. This increased the working population of the country to around 44% in 1980. The percentage grew to around 55% in 2022 and is expected to reach 58% by 2032.
The UN report named, World Population Prospects, highlighted that India’s population might surpass China’s population in 2023 and will continue to surge. According to the Population Foundation of India, over 62% of the population is between 15 and 59 years of age and the median age of the population is between 28 to 29 years.
However, the General Fertility Rate (GFR) in India has declined over the past decade, which implies that the share of the young population has declined, and the share of the dependent population has increased. According to the ‘National Statistical Office’s report” on the elderly population in India, 2021, the elderly population is expected to touch around 194 million in 2031, which is a 41% increase over a decade.
This means that a demographic dividend is available for a certain period which is also referred to as “the window of demographic opportunity”. This is a period when the working age ratio is equal to or greater than 150% and the dependency ratio is less than or equal to 66.7%.

Demographic Dividend and its benefits:

According to the United Nations Population Fund (UNPF), demographic dividend means the economic development potential achieved by a country through the shift in the population age structure, generally when the working age population is greater than the non-working population.
The demographic dividend comes with a lot of advantages. Some of them are:
1. The rapid rise in industrialization and urbanization
2. Increase in workforce
3. Increase in the savings rate
4. Improved economic growth
5. Expansion of fiscal space
In advanced economies, the demographic dividend has contributed to up to 15% of the overall growth. The realization of the potential benefits of demographic dividend is not spontaneous and comes up with a lot of challenges. To achieve its benefits, it is crucial to ensure proper policies and efforts to avoid rising unemployment and shrinking the social and economic risks.

Opportunities for India During the Window of Demographic Opportunity:

For a country to grow exponentially, productive contribution is required from all segments of society, especially from children and the youth of the country. Significant investment among them plays a pivotal role in yielding long-term returns in terms of high productivity until they enter the elderly cohort.
Our Prime Minister, Mr. Narendra Modi often stresses the phrase “Demographic Dividend” in his speeches. Once he highlighted that its critical to prepare the demographic dividend of the country as per the demands of the changing job roles.
Even the main agenda behind the theme for World Population Day 2022, was to focus on India’s population and their rights, desires, and aspirations, as it is pivotal to achieve significant economic growth and empower the youth of the country.
India entered the demographic dividend in 2005-2006 and according to 2018-19, Economic survey it will rise in around 2041 and remain there till 2055-56.
In the absence of advantageous social, economic, and political conditions, India has been careless in improving the opportunities available for the youth of the country and in turn has developed a young and angry population. This has resulted in an economic disaster and political unrest.
Therefore, India can enjoy its golden period between 2020 and 2040, if the demographic dividend is utilized and recognized properly.

Various factors contribute to the underutilization of this window on the available demographic opportunity:

Asymmetric Demography-

The growth in the working-age population is likely to be concentrated in the poorest parts or states of the country. The full potential of a population can only be explored and realized if there are enough job opportunities for the youth of the country.

Human Development parameters are at a lower end-

HDI is a summary measure of the average achievement among the three key dimensions that are necessary for human development. The dimensions include a decent standard of living, healthy life, and access to various knowledge resources.
It is calculated using four indicators namely: the Gross National Income (GNI) per capita, mean years of schooling, expected years of schooling, and life expectancy at birth.
HDI was dragged down in 90% of the countries due to Ukraine- Russia war, the climate crisis, and the covid-19 pandemic.
According to the Human Development Report 2021-2022, the Human Development Index (HDI) for India moved from the 130th rank in 2021 to the 132nd rank in 2022. The HDI in 2021 was lower than the world average of 0.732.
According to the findings, highlighted in a report by UN Development Program, the decline in life expectancy on the global level is a major contributor to the declined HDI. India’s life expectancy dropped from 69.7 years to 67.2 years.
Another reason is the increased income inequality in the country. A lot of reports suggested an increase in inequality due to an increase in poverty and the shrinkage of the middle class.
Even the world Inequality report 2022 highlights that the world’s extreme poverty has been observed in India.

Jobless growth-

India’s GDP has grown at an annual rate of 7-8% in the last decade. Even the world bank revised the GDP forecast for 2022-2023 from 6.5% to 6.9%, given an improvement in India’s performance in the second quarter.
However, this growth has not translated into the creation of more employment opportunities for the available labour force.
The unemployment rate since a decade has been up for and is hovering around 7-8%. According to the Centre for Monitoring Indian Economy (CMIE), currently, India has an unemployment rate of around 8.3%.
The Confederation of Indian Industry (CII) in its report namely” Harnessing India’s Demographic Dividend for Boosting Growth ‘highlighted the importance of the availability of jobs and equipping the workers with the relevant skills.

Multidimensional poverty index-

The multidimensional poverty index is published by the Human Development Report Office. It is calculated using three dimensions (health, education, and living standards) and 10 indicators.
India’s MPI value fell from 0.283 in 2005-2006 to 0.069 in 2019-2021.
India ranked 62 in the global MPI 2020, which ranked 107 countries. In 2021, its global MPI rank was 66.

Lower-female labour participation-

Women’s participation in India’s labour force is a driver of growth and therefore an improvement in this sector can help the country achieve a greater economic upswing. However, the relationship between these two factors is very complex.
Reserve Bank of India Deputy Governor Mr. Michael Debabrata Patra once stated that female labour participation in India, is among the lowest in the world, in fact, its stands lower than Pakistan.
According to the federal Government data, female labour participation has been among the lowest emerging economies, which was just 25% in 2021.

Global Hunger Index in India:

The hunger index measures a country’s performance based on four component indicators. They are undernourishment, child wasting, stunting, and child mortality.
According to the Global Hunger Index 2022, India ranked 107 out of 121 countries.
India has a score of 29.1, which highlights that the level of hunger in India is serious.
A report namely “State of Food Security and Nutrition in the world”, underlined a worrisome estimate of increasing food insecurity in the country.
According to the report, around 40.6% of the population in India from 2019- 2021, has suffered from moderate to an extreme levels of food insecurity.

Informal Nature of the Economy:

An informal economy is unregulated and unrecognized under labour legislation and social protection. This impacts working in the informal economy as it leads to irregular income, lack of a safe and healthy environment, low levels of skills and productivity, and lack of access to technology, training, and information about markets.

How can India reap the benefits of its demographic dividend

For India to reap the benefits of its demographic dividend and fasten its economic growth, various factors are to be considered.

Improvement in healthcare infrastructure and facilities available:

Programs implemented and initiated by the Government that targetsthe young population of the country such as the Integrated Child Development Scheme, The POSHAN Abhiyan, and Anganwadi services schemes, need to be promoted and implemented effectively, including the isolated areas that lack such services.
Significant investment is required in health care services because the percentage of India’s GDP on health care spending is around 2%.
However, Government spending at around 3% is a widely accepted norm and even according to the Economic Survey, 2021, Government spending on health care should rise to at least between 2.5% and 3%.

Skill Development:

To increase the employment rate in the country, skill development plays an important role. It is crucial that the young population is equipped with the right skills that are mandatory for the modern economy.
To empower the youth of the country with all the relevant skills, the Government initiated the National Skill Development Corporation (NSDC) in 2008.
The target was to complete the skilling and up-skilling of around 500 million people in India by 2022.
There have been other initiatives and schemes as well such as the Skill Assessment Matrix for Vocational Advancement of Youth (SAMVAY), and the Employability Enhancement Training Program.
Therefore, constant efforts and improvement is required in terms of skill development in the country.

Job creation:

As per Better place’s Frontline Index Report, India created around eight million front-line jobs in 2022.
According to the World Bank, India needs to generate around 8.1 million jobs a year to maintain its employment rate.
It is true that the Indian Government has made significant efforts in terms of job creation especially through schemes such as “Skill India”, “Make in India”, and Start-up India”.
However, a lot more needs to be done to fully utilize and create a competitive advantage out of the talent surplus that is available in India.

Increased Urbanization:

With an increased population in the country, the urban population is expected to increase significantly. Given, the people in rural areas are attracted to the urban cities and towns in search of better employment opportunities and a standard of living.
India’s urban population is expected to stand at 675 million in 2035.
Development in terms of better health and education facilities, urban infrastructure, and basic amenities is mandatory to cater to the requirements of the rising population.
Indian Government has taken various initiatives for the development of the urban infrastructure such as the Smart Cities Mission, Pradhan Mantri Awas Yojana (PMAY), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), etc.
Therefore, continuous developments, iterations, and implementation within these schemes are pivotal to achieving the benefit of the demographic dividend phase.

Improved Education facilities:

Education is referred to as human capital, due to its considerable contribution to the economic growth
Around 3% of the GDP is spent on education. Even the National Education Policy 2020, recommends an increase in expenditure to around 6% of GDP.

Conclusion

India is on the right side of the demographic transition curve; therefore, it has a golden opportunity to enhance the social-economic development of the country. Therefore, proper investments and efforts are required to improve the existing policies and create a sustainable impact.