As per UNFPA estimates, India has surpassed China to become the most populous country of the world. With the youth bulge and low dependency ratio, India will have the largest size of working population soon. Government needs to make sure that this opportunity is well utilised to reap the demographic dividend.
Human Capital is the productive capacity generated by an individual due to better education and health. Human Capital Index 2020 by World Bank ranked India at 116 out of 180 countries, with an expectation that an average worker in India can only reach about half her full potential during her lifetime. India’s Human Capital formation has worsened since then, due to the COVID-19 pandemic.
Investment in human capital is needed for technological growth, improving productivity, creating social innovations, etc so that the country can develop at fast pace. Steps needed to make India a human capital powerhouse are:
- Health: 47% of Indians are below the age of 25 years. India needs to work on improving the quality of primary healthcare, so that the young adolescents have access to healthcare, and do not develop life-threatening diseases, which reduces their human capital. Ayushman Bharat Yojna is a step in that direction.
- Nutrition: High proportion of malnutrition persists in India (close to 30% as per NFHS-5). Various government initiatives like Mission Poshan 2.0, Mid-Day Meal Scheme and Anaemia Mukt Bharat Abhiyan are steps in this direction.
- Education: Quality of education directly influences the human capital formation. Only about 74% Indians are literate. New Education Policy, Samagra Siksha Abhiyan, National Digital Literacy Mission and Eklavya Model Residential schools for Tribals are important steps in this direction.
- Skill Development: India Skills Report 2022 suggests that only 48.7% of India’s educated youth are employable. Participation of private sector in skilling sector, will ensure that skill development is demand driven and addresses the needs of the market. Maharashtra Govt Skill University, aligned with NEP will be a major step in developing job ready human capital.
- Entrepreneurship: India is booming into the startup sector, ranking third in the world now. Focus on startups will lead to job creation in the economy. These startups contribute to youth development significantly.
- Financial Inclusion: Combined with improved purchasing power, financial inclusion will make India a formal market. Such formal inclusion will ease access to credit and provide a social safety net, leading to better human capital.
- Gender Inclusion: Gender gaps in the early years are closing, but inequalities persist in adulthood. Female participation in politics, workforce and higher management should be nurtured.
However, there are challenges that needs to be addressed:
- Baby boom in states like UP and Bihar, coupled with ageing population in the South Indian States, will be a challenge for policy makers. Ability to handle demography effectively is challenging at central level.
- With the increasing older population (about 10% of the population soon), the significant challenges will include social security, access to geriatric healthcare, and post-retirement employment. UN study shows that ageing population has a higher proportion of poverty, with them being dependent on others for sustenance. Present government schemes lack meaningful impact, being of tokenistic financial support.
- By 2050 more people will live in urban areas that in villages. The cities lack adequate basic amenities such as housing, water, transportation and sanitation. Urban planning to support the high population becomes challenging when the cities are already overpopulated.
- India spends just 4% of its GDP as public expenditure on human capital. This small budget can be better utilised if there is decentralisation, so that principle of subsidiarity is followed.
Therefore, policies with gender equality and rights, parental leave programs, child tax credits and workforce gender equality policies should be introduced so that the population does not become gendered and continues to support a balanced demographic dividend for years to come.
