Demographic Dividend & Employability Concerns in India – Explained Pointwise

India has become the most populous nation with ~1.44 billion population, which is slightly more than China. The exponentially increasing population levels in the 1970s, predicted a doom for India and the World. However, the Indian population growth story has belied the prediction of doom. With drop fertility rates (which is now below the replacement levels today), significant reductions in maternal and child mortality rates, India’s demography has entered into a phase of ‘demographic dividend’.

What is the demographic dividend?

According to the United Nations Population Fund (UNFPA), demographic dividend means the economic growth potential that can result from shifts in a population’s age structure. The demographic dividend leads to an increased labour supply that increases the production of goods and boosts savings and investment. India has one of the youngest populations (62.5% of its population in the age group 15-59) in an aging world.

What is India’s Demographic Status?

• According to the State of World Population Report 2023, published by the UNFPA, India has surpassed China as the most populous country, with a population of 142.86 crores compared to China’s 142.57 crores.
• India’s population growth has slowed down significantly in the past 10 years, with the total fertility rate (TFR) declining to 2 in 2020-2021 from about 3.4 in the early 1990s. A TFR of 2.1 is necessary for a country to attain population stability.
• India’s population is forecast to grow to 1.67 billion in 2050 and peak at 1.7 billion in 2064 before settling at 1.53 billion in 2100.
• Two-thirds of India’s total population are between the ages of 15 and 64. It presents a potential demographic dividend if education, skill development, and opportunities are provided, particularly for youth from disadvantaged sections and women.

What is the significance of India’s huge demographic dividend?

1. Increased Supply of Labour: The rapidly rising young population results in the increased labour supply, as more people reach working age.
2. Economic growth: Demographic Dividend results in better economic growth brought about by increased economic activities due to higher working age population and lower dependent population. Demographic dividend has historically contributed up to 15 % of the overall growth in advanced economies.
3. Capital formation: The propensity of saving increases with the decrease in the number of dependents. This increases national savings rates, increases the stock of capital in developing countries and provides an opportunity for enhanced capital formation through investment.
4. Creation of Infrastructure: Increased fiscal space created by the demographic dividend enables the government to divert resources from spending on children to investing in physical and human infrastructure.
5. Increase in Female Human capital: Decrease in fertility rates result in healthier women and fewer economic pressures at home. This provides an opportunity to engage more women in the workforce and enhance human capital.
6. Innovation and entrepreneurship: A young population can lead to increased innovation and entrepreneurship, with more startups and unicorns emerging in various sectors like healthcare, education, agriculture, and financial services.
7. Climate action and sustainability: A young and educated population can drive sustainable development by prioritizing climate action and adopting environmentally friendly practices.
8. Increase in Global influence: India’s rising population, combined with its position as the world’s largest democracy and a major economy, can help it become a global manufacturing hub, startup capital, and exporter of skilled manpower.

What are the challenges/limitations that can turn India’s ‘Demographic Dividend’ into ‘Demographic Disaster’?

1. Lack of employability: Poor human capital formation is reflected in low employability among India’s graduates and postgraduates. According to ASSOCHAM, only 20-30 % of engineers find a job suited to their skills. Thus, a low human capital base and lack of skills is a big challenge.
2. Low human development: India ranks 134 out of 189 countries in UNDP’s Human Development Index. The life expectancy at birth, and the mean years of schooling is much lower than other developing countries.
3. Hunger and Malnutrition: In the Global Hunger Index (2023), India was ranked at 111 out of 125 countries. The nutrition, stunting, wasting and underweight among children below five years and anemia among women pose serious challenges. According to India’s epidemiological trajectory, India faces the double burden of communicable and non-communicable diseases (NCD).
4. Informal economy: Informal nature of economy in India is another challenge in reaping the benefits of demographic transition in India. The workers in the Informal economy are underpaid and devoid of social security benefits.
5. Jobless growth: 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%. This means that around half of the working age population is jobless. There are future concerns of further jobless growth due to deindustrialization, de-globalization, the fourth industrial revolution and technological progress.
6. Low Women workforce Participation rate: According to the latest Periodic Labour Force Survey (2022-23) female LFPR is around 37.0%. This poses a serious challenge in effectively reaping the demographic dividend.

What are the reasons for low employability of India’s workforce?

1. Lack of employable skills: One of the main reasons behind the high youth unemployment rate in India is that schools even today are training students from a young age in skills that have no use in the market in the future. The World Economic Forum Report also highlighted the need for skills of the future, especially those that involve technology, such as programming, data science, big data, machine learning, AI, web development, etc.
2. Obsession with “honourable” jobs: Indian society puts a high value on graduates and white-collar jobs and often ends up neglecting those with adequate vocational skills or those who have completed on-the-job training.
3. Poor communication skill: In today’s era, good communication skill is necessary, as our economy is expanding to other countries also. Employers want to recruit people who possess good communication skills so he/she can deal with foreign clients also.
4. Dynamic nature of job market: The job market is changing faster, candidates who do not equip themselves with new technology or adapt themselves to changing nature of jobs find it challenging to get employment.
5. Rising trend of voluntary unemployment: While the lack of sufficient job creation could lead to resentment due to people’s high aspirations, NITI Aayog member Bibek Debroy, flagged a dramatic rise in voluntary unemployment across the country, where people choose not to work below a certain income level after ‘investing’ in education.
6. Low labour force participation of women: After recording some improvement in recent years, India’s notoriously low female labour force participation rate (LFPR) seems to have stagnated, data from the Periodic Labour Force Survey (PLFS July 2021-June 2022) shows. 29.4% of women (aged 15-59) were part of India’s labour force in 2021-22, as compared to 29.8% in the preceding year. In contrast, men’s LFPR improved from 80.1% in 2020-21 to 80.7% in 2021-22.
7. Less growth of the employment-intensive industry: Less growth of employment-intensive industries like manufacturing, textile etc are a major problem. The skill-intensive service industry is unable to absorb the workforce,as these jobs require high-level skills.

What are various initiatives to improve the employability of the workforce in India?

1. Skill India Mission (SIM): Provides skill, reskill, and upskill training to youth across all states through various schemes and partner institutes to prepare them for future jobs in diverse industries.
2. National Policy for Skill Development and Entrepreneurship (2015): Umbrella policy to unify skilling activities, promote common standards, and link efforts to demand centers.
3. Pradhan Mantri Kaushal Vikas Yojana (PMKVY): Flagship program that delivers free, industry-relevant short-term training, offers recognition of prior learning, and ensures placement assistance.
4. National Apprenticeship Promotion Scheme (NAPS): Incentivizes employers to engage apprentices, combining practical work experience with formal study to boost job preparedness.
5. Startup India Scheme: Fosters entrepreneurship through funding, mentoring, and tax benefits, encouraging youth to launch innovative ventures.
6. Sector Skill Councils (SSCs): Develop sector-specific standards and training, closely collaborating with industry to ensure skills match workforce demand.
7. E-Shram Portal: National database of informal workers to enable targeted skilling, employment benefits, and social security integration.

What should be the way forward to improve the employability of the workforce in India?

1. Strengthen Industry-Academia Linkage:
   • Align curricula of schools, universities, and training institutes with real-world industry needs, ensuring the imparting of job-relevant skills through partnerships, internships, and apprenticeships.
   • Embed soft skills, digital literacy, and adaptability within both technical and general education to boost workforce flexibility and professional conduct.
2. Scale & Modernise Skill Development:
   • Expand vocational training and apprenticeship opportunities, emphasizing emerging sectors such as AI, robotics, renewable energy, healthcare, and tourism.
   • Encourage modular skill courses, blended learning models, and experimentation with digital platforms to increase access, especially in rural and excluded communities.
3. Promote Formalisation of Economy: Formalize informal employment by leveraging digital platforms like e-Shram for benefits, skilling, health and retirement coverage, and dignified employment contracts.
4. Foster Innovation, Startups & Entrepreneurship: Streamline regulatory processes, offer startup incubation, and build access to credit to unleash self-employment and micro-enterprises, especially for youth and women.
5. Public-Private Partnerships (PPPs): The government can work with the private sector to fund and manage skill development initiatives on a large scale.

Conclusion:
“Solving the employability crisis is less about the skills that our youth need to build and more about the opportunities that need to be built to skill our youth,”.