Demographic Dividend in India

We have always thought that the tremendously growing population of any country is a setback on its road to social and economic growth. With huge population come huge responsibilities and challenges set in front of any state. Growing population needs more food, more land, more water, more and more scarce resources. But the concept of Demographic Dividend unveils the positive side of the population growth.

‘Demographic Dividend‘ is defined as ’the rise in the rate of economic growth due to rising share of working age population (15-59 years)…’ The demography of a state transits from one phase to another and the dividend can be reaped by the country when the percentage of workforce in the population increases, leading to more output and hence economic growth with a ‘multiplier effect’. Further the dependency rate in the population decreases owing to relatively less number of people and old age population. The economic growth is further accelerated as less dependency rate amplifies individual savings thereby surging the investments. It also becomes convenient for women to join the workforce as due to decrease in family responsibilities (they marry late and hence have fewer children) and more freedom.

It is noteworthy that by 2020, Indian average age population is estimated to be 29 years as against 37 years in US, 45 years in Western Europe and 48 years in Japan. This is good news as the younger generation with reservoirs of human capabilities can really change the face of the country and bear the unique potential to  rid India of its malaises with energy, enthusiasm, labor power and vibrant ideas.

Though this makes us a lot more jubilant, it perhaps is just one side of the story. The continuation of the following facts can result in the reversal of the entire dividend. In India 35% of the population do not pass middle schools, only 25% take admission in universities and only 12% of the total workforce is skilled.

No gain has ever come without a pain. To reap the best harvests, the crop needs to be taken good care of. So India cannot benefit unless it invests qualitatively and quantitatively in sectors such as education, health and infrastructure to improve them from the grass root level. A lot of economists question the very capability of India to reap the benefits of demographic dividend. There may be workforce ready for use, but till the time economy has enough jobs to offer, the entire purpose gets lost. So job creation is one of the biggest challenges in India. But this cannot come about with the improvements in the education sector – which is the most important ingredient to develop human capital and capabilities.

Question is with 35% of the people not even completing education at middle school level, still so many out of reach of secondary and university education and deplorable government school standards, will India be able to take full advantage of the demographic boom? So there is a huge responsibility of imparting quality education as many of those few still educated fail to bear any practical skills. National Association of Software and Service Companies (NASSCOM) has reported that only 20% of Indian new Engineering Graduate students are employable. Businesses should come up investing in this social sector and Public Private Partnership in the education sector, which can help India overcome this problem lest our country faces a ‘talent gap’ of more than 5 million by the end of 2012 due to lack of employable skills, say a few reports.

Even the health sector that has long been neglected should see a huge surge in investments to keep the population working in its full capacity.

Infrastructure is also a potent sector (especially infrastructure in agriculture) where huge investments should be made which would lead to growth in industries, hence employment. Though with Public Private Partnership, infrastructure has grown by leaps and bounds, there is a huge scope for improvement in India.

Further sector specific investment is the need of the hour to make the economy open to every job opportunity with workforce available for each of them. If our country is not able to create employment opportunities to tap the workforce’s abilities, there would inevitably be sky rocketing unemployment, giving rise to its vicious web. The future of our country seems prosperous if only it is handled well by the government and various sectors. Huge efforts need to be made to avoid converting India’s ‘demographic dividend‘ into a ’demographic nightmare’.

Juhi Gupta

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