India’s Demographic Dividend; Will it be Wasted?

By Rajshree Gupta

India has reached the point at which its growth rate should accelerate. Is it because of the capital inflows that the government and economists always worried about or is it because of some miracle which has suddenly set everything alright? Of course not, it is because of its internal factor only that is the demographic dividend.

blue-business-graph“Demographic dividend refers to a period – usually 20 to 30 years – when fertility rates fall due to significant reductions in child and infant mortality rates. This fall is often accompanied by an extension in average life expectancy that increases the portion of the population that is in the working age-group”, as Wikipedia says. Clearly, if there are more people in working population, indubitably, there will be less expenditure on old age and child population ( which don’t add much value to the society) resulting in more savings and hence more investment, which will lead to growth. Also, if there is a fall in fertility rate, less children means women can contribute more to the society by working. In addition to this, government can spend more on infrastructure and other productive factors rather than spending on education and health.

Explicitly, this kind of demographic transition from more of dependent population (non-working population) to more of independent population (working population) is very fruitful for any country. Do you know the sad part about this? India’s Demographic Dividend is at its peak and India is unable to take its advantage.

The data shows that India’s working age population (15-64 years) now is 63.9% of the total, as against just short of 60% in 2001. From this number, the ‘dependency ratio’ — the ratio of children (0-14) and the elderly (65-100) to those in the working age — is as low as 0.56. And these trends will continue for another two decades or three after which the working population will start aging and new working population will be less because of low fertility rate today. Hence, the dependency ratio will rise.

windowslivewriterindiaandchinathedifferenceinpopulationgr-6d9working-age-population-comparison4This is the golden period for India. But it is wasting it because of the internal factors only: the social factors. Enough employment is not there. So what if dependence ratio is low, working population can’t work without a work. Plus, no clear picture is available about “household savings” which is important for the economic growth. Educational and health facilities are already below the desired levels. Thus, government massive expenditure cannot deviate from this towards the other economic needs: the infrastructure and maintenance. Also, female participation in labour force hasn’t shown any significant improvement which should not has been the case, may be because of patriarchal nature of Indian society and low level of education among most women in the country.

india-job-fair-2011-10-12-10-1-13Although the next 20 years could turn into the years of glory but if India cannot take advantage of its demographic dividend, it’s because of its social environment. Conservatism is not something that will vanish in few years or so. Government expenditure on health and education measures cannot be cut. Employment generation is necessary to keep the working class into the active labour force, only then there is a point of talking about “demographic dividend”. And then, spending on the building, roads etc are also a necessity, plus it’s sufficient too, for the measurement of economic development. Spending too much will result in widening budget deficit.  Government needs to have a clear vision of how to tackle this problem otherwise; it may happen we have to wait very long for such a demographic transition to occur again.


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