Demographic Dividend- Demographic Transition and Opportunity for India – UPSC GEOGRAPHY Notes

Demographic Dividend- Demographic Transition and Opportunity for India – UPSC GEOGRAPHY Notes

The world is going through a phase of demographic transition towards aged populations, but India is enjoying DIVIDEND.  Adaptation strategies will require governments, businesses and common people to make key adjustments. This may usher in a great opportunity for India that is experiencing a demographic dividend.

The Demographic Dividend is defined as "an increase in economic output that occurs when the number of persons in the workforce grows faster than the number of dependents." "A country with both increasing young people and reducing fertility has the potential to enjoy a demographic dividend," according to UNFPA.

Demographic Dividend?

• The demographic dividend, according to the United Nations Population Fund (UNFPA), is the economic growth potential resulting from a changing population age structure, with a large proportion of people in the working-age group of 15 to 64 years as opposed to the non-working-age population of below 14 years and above 65 years.
• When the proportion of working people in the total population is high, a demographic dividend occurs, indicating that more people have the potential to be productive and contribute to economic growth.
• Many argue that there is great potential for economic gains due to the "demographic gift," which is a dividend between young and old.
• To achieve economic growth, the younger population must have access to high-quality education, adequate nutrition, and good health, including sexual and reproductive health.
• When a country transitions from a rural agrarian economy with high fertility rates to an urban industrialised economy with low fertility and mortality rates, it experiences a demographic dividend.

Demographic Dividend in India

• In an ageing world, India has one of the youngest populations.
• India's median age will be just 28 by 2020, compared to 37 in China and the United States, 45 in Western Europe, and 49 in Japan.
• Since 2018, India's working-age population (people aged 15 to 64) has grown faster than the dependent population (children under the age of 14 and people over the age of 65).
• This increase in the working-age population will last until 2055, or 37 years from now.
• This transition occurs primarily as a result of a decrease in the total fertility rate (TFR, which is the number of births per woman) following the stabilisation of life expectancy.
• Two interesting facts emerge from a UN Population Fund (UNFPA) study on India's demographic dividend.

• India has a five-decade window of demographic dividend opportunity, from 2005-06 to 2055-56, which is longer than any other country on the planet.
• Because of the different behaviour of the population parameters, this demographic dividend window is available at different times in different states.

Opportunities for Demographic Dividend in India

Due to the higher working-age population and lower dependent and non-working-age populations, the country’s manpower will be strengthened and help increase the speed of the economy’s growth.

• Personal earnings will also increase due to the demographic dividend phase, resulting in greater purchasing power and further developing the country.
• Demographic dividends also made the women independent and increased their standard of living, resulting in a decline in the Total Fertility Rate (TFR), leading to the economy’s growth.
• Many people from the lower middle class and below the poverty level (BPL) have the opportunity to shift toward a middle-class society. who educate their children or generations, further establishing an enlightened and aspirational society.
• The demographic dividend also boosts the secondary sector, the manufacturing sector, as more younger people get employed in the factory or industry, and the younger have more potential compared to the older, which enhances the economy’s productivity.
• Historically, the demographic dividend has contributed up to 15% of the total growth in advanced economies.
• The first major economic country to experience rapid growth due to the structural change in population was Japan, whose demographic dividend phase was between 1964 and 2004.

Measures to Tap India’s Demographic Dividend

There are different measures and recommendations for tapping the demographic dividend and growth of the country. Following are the measures to tap India’s demographic dividend-

1. Increase the investment in the Education sector to improve and boost literacy in the country.
2. Increase the funds to be spent on the Healthcare sector to improve the existing medical facilities.
3. Release proper and required funds for the research and development section of government.
4. Invest more in the field of skill development.

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?

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.

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.