Forfeited before realizing: Demographic dividend’s potential and reality in India

By IMPRI Team
Demographic dividend is an important socio-economic factor which has the potential to aid the country towards progress and prosperity. It is hotly debated but has lost its relevance and presence in the larger public discourse. As part of its #WebPolicyTalk series, The State of Population and Development #PopulationAndDevelopment, #IMPRI Center for Human Dignity and Development (CHDD), IMPRI Impact and Policy Research Institute, New Delhi, organized the panel discussion on Forfeited Before Realizing: Demographic Dividend’s Potential & Reality In India.
Mr. Devender Singh, Global Studies Programme, University of Freiburg, Germany; Visiting Senior Fellow, IMPRI was the moderator for this discussion. He explained the concept of Working Age Ratio (WAR) and stated how the WAR can be highest for India in the 2020-40 period. He even mentioned the right conditions required for realizing a demographic dividend which includes education and health. Thus, Mr. Singh set the premise for the further discussion.

Story of demographic dividend: Indian context

Professor P.M. Kulkarni is a Demographer and a retired professor of Population studies at JNU University, New Delhi. He briefly explained the phenomena of demographic dividend and how it was founded by East Asian Tigers and rapid economic growth in East Asian countries. He iterated that the window of a demographic dividend is not planned and not included in Policy action plans but it can be controlled by steep decline in fertility rates and higher labor force participation rate.
When dependency ratios are less than the working age population then the conditions are favorable for the demographic window to be open. Professor also depicts the favorable demographic dividend through graphical representation and shows how for India the next 45-50 years are most favourable.A comparison with China is done in order to contrast its early dividend and display its long time period of window and low dependency ratio.
A region-wise division shows a stark contrast between the southern states who have reached the dividend earlier than Central states. The population growth is also supposed to fall after 2061 and the teenage population would decline. He later concluded by saying that India should find ways to combat challenges like Inter-state migration which hinder us from taking a benefit of the dividend.

The number game of working age population

Dr. Neha Jain is an Assistant Professor of Economics at the Indian Institute of Foreign Trade (IIFT). She elaborated more upon the Demographic opportunity and the two stages that can be expected in India. She also showed the relationship between the increase of the working age population to a proportionate rise in economic growth. She also applied the regression based inequality decomposition model to display the variation among states in the working age population. The demographic opportunity window in India is only 30 years which is comparatively low as per Dr Jain.
Post that, the aging burden would increase. She also listed out the various challenges and hurdles in managing this demographic dividend such as dwindling investment in education, low life expectancy rate and poor quality of governance. The rapid pace of aging in India in comparison to other countries like France is also a huge barrier in realizing the true benefits of the demographic dividend.

Employment growth and industrial policy: challenge for Indian States

Professor Jayan Jose Thomas is a Professor of Economics at the Indian Institute of Technology, Delhi. He commenced by showing how India is a leading contributor in the working age population in the world in the 2010-2020 period. States like Kerala and Tamil Nadu run the risk of ‘growing old before getting rich’ because of declining fertility rates. He hinted at an increase of 4.5 million jobs per year in the industry, construction and services sector as there is a gradual exit from the agriculture sector.
The employment challenge is of serious concern for states having a younger population as the actual rate of job creation is unable to match the rising rate of job seekers in the economy. This would create competition between workers and reduce their bargaining strength thus affecting the most vulnerable sections amongst the workers.

The ranking of states on ‘Ease of doing Business’ is based on cheap land and labor which in return do not create a labor conducive environment. Low wages depress demand and constrain growth and employment creation. Giving a case study example of Kerala, he explained the demand-supply mismatch in the labor market. He concluded by explaining the challenges in formulating an industrial policy which requires creating knowledge intensive industries which would require huge investments in infrastructure. However, limited financial resources pose a challenge for the same.

Comparison with China: A grim reality for India

Professor Santosh Mehrotra is a Visiting Professor at the Center for Development Studies at University of Bath, UK. He has also written a book on the same topic titled ‘Realizing Demographic Dividend’. He began by explaining why China’s demographic dividend was longer, mainly pointing out their early exit from agriculture. He highlights the ignorance of policymakers and academicians from the manufacturing sector and its ability to create unskilled jobs.
According to him, the alarming rate at which number of unemployed people are growing is also a cause of concern. He stated that 85% of the working age population in China and 90% in South Korea possess technical education and vocational training as compared to less than 5% in India.

Summing up

Mr. Devendra Singh concluded the Panel discussion by presenting the final statements and summary of the discussion. He recognized the poor preparation and extremely low rates of investment in education and healthcare which was echoed by the panelists as well. He mentioned about the worrisome learning outcomes in school, absolutely no vocational training and dismal number of women in the workforce as some of the biggest barriers in realizing the dividend. He also listed out the social security issues for the older population and low-quality of migration from Northern states to Southern states as concerning situations as well.
He concluded by saying that there is no urgency in high focus states as the 6 northern-central states would hone 2/3rds of the population growth. It remains to be seen what policy interventions are put into place to improve the quality of education and healthcare. Finally, he said that we would have a limited and skewed demographic dividend out of the potential moderate overall dividend. This would consist of upper-middle-class urban young people who are healthier, better educated and highly skilled and would be able to gain skilled jobs in India or abroad.
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Acknowledgement: Manush Shah, Research intern, IMPRI

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