Reaping India’s demographic dividend

News: India is in the middle of a demographic transition. This is evident from its declining fertility rate which currently is 2.0, median age of 29 years, and a falling dependency ratio (expected to decrease from 65% to 54% in the coming decade).  

This provides a window of opportunity towards faster economic growth.  

What are the challenges in realising its true potential? 

The demographic transition can turn into a demographic disaster without proper policies. 

The increase in the working-age population may lead to rising unemployment, fuelling economic and social risks. 

Has India reaped any benefits from demographic dividend till now?  

Although India has already begun to get the dividend, but the benefit to the GDP from demographic transition has been lower than its peers in Asia and is already declining. 

Hence, there is an urgency to take appropriate policy measures. 

How can India achieve the true potential of its demographic dividend? 

Benefits arising out of a demographic dividend are not automatic. Following steps need to be taken:

Need to undertake an updated National Transfer Accounts (NTA) assessment: India’s per capita consumption pattern is way lower than that of other Asian countries. A child in India consumes around 60% of the consumption by an adult aged between 20 and 64, while the same ratio in China is 85%. 

India needs to update its NTA data, prepare state-specific NTAs on the basis of which they can be ranked. 

India needs to Invest more in children and adolescents-India ranks poorly in Asia in terms of private and public human capital spending. There is need to spend on nutrition, learning during early childhood, help students transition from secondary education to universal skiling and entrepreneurship. 

Health investments– The public spending on health in India has remained flat at around 1% of GDP. Evidence suggests that better health facilitates improved economic production. 

Making reproductive healthcare services accessible -We need to provide universal access to high-quality primary education and basic healthcare. 

National Family Health Survey-5 (2019-21) shows that there is an unmet need for family planning in India at 9.4% which is very high as compared to 3.3% in China and 6.6% in South Korea. This needs to be bridged. 

Education– It works as an enabler to bridge gender differentials.  

In India, boys are more likely to be enrolled in secondary and tertiary school than girls. In the Philippines, China and Thailand, it is the reverse. 

Need to increase female workforce participation in the economy-As of 2019, 20.3% of women were working or looking for work, down from 34.1% in 2003-04.  

Increase in female workforce participation will likely delay the age of marriage for women and make her participate in the economy more productively, as also exercise her rights and choices. 

India needs to address the diversity between States-While India is a young country, the status and pace of population ageing vary among States.  

Southern States are advanced in demographic transition and already have a higher percentage of older people while the north-central region is the reservoir of India’s workforce. However, this also offers a lot of opportunities to states to work with each other. 

New governance model which can enable policy coordination between States on various emerging population issues such as migration, ageing, skiling, female workforce participation and urbanisation.  

India can learn from other countries like Singapore, Taiwan and South Korea. 

They have already reaped the benefit of their demographic dividend to achieve incredible economic growth by adopting forward-looking policies. 

Source: This post is based on the article “Reaping India’s demographic dividend” published in The Hindu on 13^th Jan 2022.