- The Demographic Dividend refers to the “rise in economic productivity resulting from a workforce expansion outpacing the growth of dependents.”
- UNFPA states that a nation experiencing a simultaneous increase in its youthful population and a decline in fertility has the opportunity to benefit from the demographic dividend.
Demographic Dividend Explained:
The demographic dividend, as defined by the United Nations Population Fund (UNFPA), refers to the economic growth potential arising from changes in the age structure of a population. Specifically, it occurs when a significant portion of the population falls within the working-age range of 15 to 64 years, as opposed to those below 14 years and above 65 years.
- The occurrence of a demographic dividend is marked by a higher proportion of working individuals within the total population.
- This demographic scenario implies that more people are capable of contributing to economic productivity and fostering growth.
- Advocates of the demographic dividend emphasize the substantial economic advantages inherent in the “demographic gift,” which results from a favorable age distribution between the young and old segments of the population.
- Realising the full economic potential of the demographic dividend requires strategic investments in the younger generation.
- Access to high-quality education, proper nutrition, and comprehensive healthcare, including sexual and reproductive health services, is essential.
- These factors contribute to the development of a skilled and healthy workforce capable of driving economic progress.
The transition from a predominantly rural, agrarian economy characterized by high fertility rates to an urban, industrialized economy marked by lower fertility and mortality rates is a pivotal phase for experiencing a demographic dividend. This transition signifies a shift that can unlock significant economic benefits for a nation.
Demographic Dividend in India:
In a world where populations are aging, India stands out with one of the youngest demographic profiles. As of 2020, India’s median age is a youthful 28, notably lower than 37 in China and the United States, 45 in Western Europe, and 49 in Japan.
A significant demographic shift is observed in India, marked by the accelerated growth of the working-age population (individuals aged 15 to 64) since 2018. This growth surpasses that of the dependent population, encompassing children below 14 and individuals above 65. The surge in the working-age cohort is anticipated to persist until 2055, spanning a substantial 37-year period.
This demographic transition is chiefly attributed to a decline in the total fertility rate (TFR), representing the number of births per woman, following the stabilization of life expectancy.
Key insights from a study by the United Nations Population Fund (UNFPA) shed light on India’s demographic dividend:
- Extended Window of Opportunity: India is presented with a unique demographic dividend opportunity, spanning five decades from 2005-06 to 2055-56. This extended period surpasses the demographic dividend windows of other nations.
- Regional Variation: The availability of the demographic dividend varies across states due to distinct population behaviors. Different states experience this window of opportunity at different times, contributing to the diverse demographic landscape within the country.
Advantages of Being a Demographic Dividend:
- Economic Growth: A higher proportion of the working-age population and a lower dependent population contribute to increased economic activity, fostering better overall economic growth.
- Enhanced Productivity: The demographic dividend leads to an expanded labor force, resulting in heightened productivity within the economy.
- Fiscal Flexibility: The demographic dividend creates additional fiscal space, allowing a shift of resources from child-related expenditures to investments in both physical and human infrastructure.
- Women’s Workforce Participation: As fertility rates decline, there is a natural increase in women’s workforce participation, serving as a new source of economic growth.
- Higher Savings Rate: The working-age period is optimal for savings, leading to an increase in the savings rate and the potential for greater investment.
- Aspirational Class Formation: The demographic dividend contributes to the emergence of an aspirational class, indicative of a significant societal shift towards a middle-class structure.
- Historical Growth Contribution: In advanced economies, the demographic dividend has historically contributed up to 15% of overall economic growth.
- Exemplary Case – Japan: Japan, among the first major economies to undergo rapid growth, experienced a demographic dividend from 1964 to 2004 due to a changing population structure.
- Industrialization and Urbanization: The demographic dividend leads to rapid industrialization and urbanization, driven by an increasing number of individuals seeking employment, thereby stimulating economic activity.
- Global Workforce Contribution: With more than 65% of its population in the working age bracket, India is positioned to become an economic superpower, potentially supplying over half of Asia’s workforce.
- Strategic Socio-Economic Planning: When population dynamics are considered in the planning and implementation of policies and programs, the socio-economic impact is likely to be more significant, maximizing the benefits for the population.
Challenges Associated with Demographic Dividend:
- Asymmetric Demography: The concentration of the working-age population in some of India’s poorest states poses a challenge. Realizing the full potential of the demographic dividend requires the creation of gainful employment opportunities in these regions.
- Lack of Skills: A significant challenge is the mismatch between the skill set of the Indian workforce and the demand for highly skilled jobs. The majority of future jobs are expected to be highly skilled, posing a barrier to leveraging the demographic dividend.
- Limited Human Capital Base: India faces limitations in human capital development, hindering its ability to capitalize on emerging opportunities. The lack of skills and a low human development index contribute to this challenge.
- Low Human Development Indicators: India’s ranking of 130th out of 189 countries in the UNDP’s Human Development Index reflects concerns about low human development indicators. Addressing these indicators is crucial for unlocking the full potential of the demographic dividend.
- Informal Economy Structure: The predominantly informal nature of India’s economy presents an obstacle to fully harnessing the benefits of demographic transition. Informal sectors often lack stability and security, impacting sustainable economic growth.
- Jobless Growth Concerns: Concerns arise regarding jobless growth due to factors such as de-industrialization, de-globalization, the fourth industrial revolution, and technological progress. There is a growing apprehension that future economic growth may not translate into sufficient job creation.
- Unemployment Rates: The NSSO Periodic Labour Force Survey 2017-18 highlights a labor force participation rate of around 53% for the age group 15-59 years, indicating a significant portion of the working-age population is unemployed. Addressing unemployment is crucial for maximizing the benefits of the demographic dividend.
Recommended Actions to Maximize Demographic Dividend in India:
- Building Human Capital:
- Invest in healthcare, quality education, jobs, and skills development.
- Foster an inclusive society and support economic growth.
- Skill Development:
- Enhance employability through skill development initiatives.
- The National Skill Development Corporation (NSDC) aims to skill or upskill 500 million people by 2022.
- Education:
- Improve educational levels with strategic investments in primary, secondary, and post-secondary education.
- Align academic learning levels with modern industry demands through academic-industry collaboration.
Support initiatives like the Higher Education Finance Agency (HEFA).
- Health:
- Strengthen healthcare infrastructure to enhance the productivity of the young labor force.
- Ensure the success of Ayushman Bharat and the National Health Protection Scheme (NHPS).
- Give special attention to the nutrition levels of women and children through effective implementation of the Integrated Child Development (ICDS) program.
- Job Creation:
- Create ten million jobs annually to absorb the growing workforce.
- Promote business interests and entrepreneurship for job creation.
- Support initiatives like Start-up India and Make in India for desired results.
- Urbanization:
- Anticipate and plan for the rapid urbanization driven by the migration of the young workforce.
- Focus on providing basic amenities, health, and social services in urban areas.
Implement urban development initiatives like the Smart City Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) effectively to address the needs of the urban population.
Frequently Asked Questions (FAQs) – Demographic Dividend and India’s Population Dynamics
1. What is the Demographic Dividend?
A: The Demographic Dividend refers to the increase in economic productivity resulting from a workforce expansion outpacing the growth of dependents. According to the United Nations Population Fund (UNFPA), this occurs when there is a simultaneous increase in the youthful population and a decline in fertility.
2. How is the Demographic Dividend Defined?
A: The UNFPA defines the Demographic Dividend as the economic growth potential arising from changes in the age structure of a population. It is marked by a higher proportion of the working-age population (15 to 64 years) compared to the dependent population (below 14 years and above 65 years).
3. What are the Advantages of the Demographic Dividend?
A: Advantages include increased economic activity, enhanced productivity, fiscal flexibility, higher women’s workforce participation, a rise in the savings rate, the formation of an aspirational class, and historical contributions to growth in advanced economies.
4. How Does India’s Demographic Profile Differ from Other Countries?
A: As of 2020, India has one of the youngest populations, with a median age of 28 compared to 37 in China and the United States, 45 in Western Europe, and 49 in Japan.
5. What is the Demographic Dividend Window in India?
A: India has a unique demographic dividend opportunity from 2005-06 to 2055-56, lasting five decades. This window varies across states due to different population behaviors.
6. What Challenges are Associated with the Demographic Dividend in India?
A: Challenges include asymmetric demography, lack of skills, limited human capital base, low human development indicators, an informal economy structure, concerns about jobless growth, and high unemployment rates.
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