Demographic Dividend refers to the economic growth potential resulting from a shift in the structure of the population age in a country.

According to the definition by the United Nations Population Fund, Demographic Dividend refers to the economic growth potential as a result of a shift in the structure of the population age in a country. It primarily occurs when the share of the working-age population (15 to 64 years) is more than the non-working-age share of the population (14 years and younger, and 65 years and older). The Demographic Dividend has an excellent scope for economic growth if the correct economic and social policies and investments are made in the economy, governance, education and health. At the same time, there are also many challenges that a country with a Demographic Dividend faces.

Demographic Dividend in India

Our country holds one of the youngest populations in the whole world. India’s median age in 2020 is 28.4 years compared to 38 in China and 48.4 in Japan. Since 2018, India’s working-age population (people between 15 and 64 years of age) has expanded more than the non-working age population — people aged 14 years or below and above 65 years of age. The transition in Demographic Dividend results from a fall in the total fertility rate (which is the number of births per woman). The Demographic Dividend opportunity in India is available from 2005-06 to 2055-56, according to the United Nations Population Fund. The time of availability of the Demographic Dividend window is different for different states of India because of the erratic behaviour of the parameters of the population.

Challenges associated with Demographic Dividend in India

  • Asymmetry in demography – The expansion in the working-age population is probable to be concentrated in the poorest states of India. In order to fully realise the Demographic Dividend, India needs to be able to create considerable employment opportunities for the working-age population.
  • Most jobs created in the future will demand high skills, and the lack of skills in the workforce of India is a big challenge. It might result in India not being able to take advantage of the opportunities because of lack of skills and low human capital base.
  • India holds the 130th rank out of the 189 countries in the UNDP’s Human Development Index. Hence, the education and health parameters have to be substantially enhanced to make the workforce of India skilled and efficient.
  • India’s informal nature of economy would prove to be another obstacle in yielding the opportunity for major economic growth during the demographic transition in India.
  • The Labour force participation rate in India for the working-age population was about 49.8% in 2017-18, which is less than half of the working-age population. These results lead to a big concern that the growth in the future could turn out to be jobless growth because of de-globalisation, deindustrialisation, the fourth industrial revolution and technological progress.

How can India reap the opportunity of economic growth from the Demographic Dividend?

  • Establishing human capital – India needs to invest in human capital through investing in skills, jobs opportunities, quality education, and healthcare. Building human capital is essential to end poverty and support economic growth.
  • Development of skills helps in increasing the employability of the young population. It is essential that the labour force of India is equipped with the right skills for future needs.
  • Educational level is a key factor contributing to economic growth. Investing in primary, secondary, and higher education is important to enhance the educational levels and reap the benefits of demographic Dividends. Other than a better education system, academic-industry collaboration is also essential to close the gap between the industry demands and the educational learning levels in academics.
  • To ensure better productivity in the young labour force, improvement in the healthcare infrastructure is important. This will also result in increasing the productivity of the economy.
  • India needs to create more than 10 million jobs each year to mitigate the addition of young people into the workforce. By promoting entrepreneurship and the businesses’ interests, people can help in providing employment to the labour force.
  • The migration of the young and working-age population will rise rapidly, leading to large-scale urbanisation. There is a need to focus on urban policy planning to give the migrating people access to basic amenities, healthcare services, and social services.

Conclusion

According to the economic survey of 2018-19, the Demographic Dividend of India will peak about 20 years from now. In 2041, the share of the population between the ages of 20-and 59 is estimated to hit 59%. We learned about the challenges of the Demographic Dividend of India, such as asymmetry in demographics, India’s informal nature of economy, low labour force participation rate in India for the working-age population, lack of skills and jobless growth in the future.