India currently has a large and growing segment of its population, about 62.5%, in the age group of 15 to 59 years. This proportion is expected to increase and reach its highest point around 2036 when it will be approximately 65%. These demographic statistics suggest that India is experiencing a demographic dividend, which began in 2005-06 and is expected to last until around 2055-56. According to the Economic Survey of 2018-19, this demographic dividend is projected to peak around 2041, with the working-age population (those between 20 and 59 years) expected to make up about 59% of the total population at that time.

Definition of Demographic Dividend

The term “Demographic Dividend,” as explained by the United Nations Population Fund (UNFPA), refers to the potential for economic growth that arises when there’s a shift in a population’s age structure. This happens when the portion of the population in the working-age bracket (typically 15 to 64 years old) is larger than the combined population of young people (14 and younger) and the elderly (65 and older).

Demographic Dividend in India

• India stands out as one of the countries with a younger population. In 2020, the median age in India is a youthful 28, contrasting with 37 in China and the US, 45 in Western Europe, and a whopping 49 in Japan.
• Starting in 2018, the number of working-age people in India (those between 15 and 64 years old) has surpassed the number of dependents, which includes children under 14 and individuals over 65. This shift in demographics is expected to last for 37 years, until 2055.
• This demographic transition is mainly driven by a decline in the total fertility rate (TFR), representing the number of births per woman, once life expectancy stabilizes.
• According to a study conducted by the United Nations Population Fund (UNFPA) on India’s demographic dividend, two intriguing facts emerge.
• India’s demographic dividend opportunity stretches over five decades, from 2005-06 to 2055-56, which is longer than most other countries worldwide.
• The timing of this demographic dividend opportunity varies across Indian states due to differences in the behavior of population parameters.

Causes

Changes in the population structure happen because of:

1. Falling birth rate
2. Lower fertility rate
3. Increased longevity
4. Falling birth rate and lower fertility rate will contribute to a reduction in expenditure, increased longevity will lead to an increase in the size of the working-age population.

Opportunities 

• India’s workforce is getting younger, and our median age is significantly lower than that of countries like China and developed nations.
• Other countries will face a challenge as a larger portion of their population will be beyond the working-age category, creating a shortage of about 56 million workers.
• India’s workforce can help bridge this gap, both domestically and internationally, contributing to enhanced economic growth.
• As our nation experiences the benefits of this demographic dividend, personal savings will increase. This translates into greater purchasing power, which, in turn, can fuel economic expansion.

Challenges 

• If we don’t implement the right policies, the demographic transition could become a serious problem.
• More working-age people in the population might cause higher unemployment rates, which can create economic and social issues.
• The unorganized job sector is growing because the workforce lacks the necessary skills.
• Decreasing wages in rural areas are leading to a greater demand for programs like MGNREGA.
• Factors like the COVID-19 pandemic, inflation, and a decrease in private investments are also having an impact on the situation.

What needs to be done?

Investing in People’s Well-being: We should focus on improving the health, education, and skills of our population. This not only helps individuals but also drives economic growth, reduces extreme poverty, and creates a fairer society.

Empowering the Workforce: To prepare our young workforce for the modern job market, we need to invest in skill development. The government’s National Skill Development Corporation aims to skill or upskill 500 million people in India by 2022.

Education for All: Enhancing our education system, from primary to higher education, is crucial. With a large young population, we can benefit from our demographic advantage by providing quality education. Collaboration between academic institutions and industries is vital to align education with industry needs. The Higher Education Finance Agency is a positive step in this direction.

Healthcare Matters: A healthy workforce is a productive one. Improving healthcare infrastructure ensures that our young labor force can contribute more to the economy. Successful schemes like Ayushman Bharat and the National Health Protection scheme are crucial. Additionally, we must pay special attention to the nutrition of women and children through programs like the Integrated Child Development Scheme.

Job Creation: We need to generate ten million jobs annually to accommodate the increasing number of young job seekers. Encouraging entrepreneurship and supporting businesses is vital for job creation. India’s improved ranking in the World Bank’s Ease of Doing Business Index is a positive sign. Initiatives like Start-up India and Make in India, if well-executed, can yield the desired results.

Urbanization Challenges: As more young people move to urban areas, we must focus on providing them with essential amenities, healthcare, and social services. Urban policy planning should prioritize the needs of this migrating population. Programs like the Smart City Mission and AMRUT need effective and careful implementation to address these challenges.

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