GS-I: India enters a 37-year period of demographic dividend.

Context

• Since 2018, India’s working-age population (people between 15 and 64 years of age) has grown larger than the dependent population (defined as 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.

Why it matters

• India’s demographics are the envy of the world.
• As populations in countries such as China, the US, and Japan is getting older, India’s population is getting younger.

What is a demographic dividend?

• Demographic dividend, as defined by the United Nations Population Fund (UNFPA) means the economic growth potential that can result from shifts in a population’s age structure.
• This happens 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).
• It is a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents.

Global Examples

Japan

• Japan was among the first major economies to experience rapid growth because of changing population structure.
• In five of these years, Japan grew in double digits the growth rate was above 8% in two years, and a little less than 6% in one.

China

• China entered this stage in 1994 16 years after Deng Xiaoping’s economic reforms started in December 1978.
• Although its growth accelerated immediately after the reforms, the years of demographic dividend helped sustain this rate for a very long period.
• In the 16 years between 1978 and 1994 (post-reform, pre-dividend) China saw eight years of double-digit growth.

India

• In near future India will be the largest individual contributor to the global demographic transition.
• A 2011 IMF Working Paper found that substantial portion of the growth experienced by India since the 1980s is attributable to the country’s age structure and changing demographics.
• By 2026 India’s average age would be 29 which is least among the global average.
• Over the next two decades the continuing demographic dividend in India could add about two percentage points per annum to India’s per capita GDP growth.

Harnessing a golden opportunity

• India’s working-age population is now increasing because of rapidly declining birth and death rates.
• India’s age dependency ratio, the ratio of dependents (children and the elderly) to the working-age population (14- to 65-year-olds), is expected to only start rising in 2040, as per UN estimates.
• This presents a golden opportunity for economic growth that could be reaped through higher growth.

Way Forward

• India needs to pay special attention to skilling and reskilling its workforce, keeping in view the changing nature of today’s job
• There are serious gaps between what the skill development institutions currently do and what the industry requires.
• Improving education and health infrastructure, in terms of both quality and access and timely action in a co-ordinated manner by the Government, private sector and researchers is necessary to harness the window of opportunity provided by a favourable demography.