Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Key phrases: Demographic dividend, working age population, fertility rate, old age, median age, education

Why in News?

• A nation’s growth requires the productive contribution of all segments of society, particularly the children and the youth, who need to be provided opportunities for self-expression. Household and national investments in children and youth yield long-term returns in terms of high productivity of the economically active population till they enter the elderly cohort.

What is Demographic dividend?

• Demographic dividend, as defined by the UNFPA, is "the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older)".
• In other words, it is “a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents”.

India’s demographic dividend:

• According to the Population Foundation of India, the median age of India's population is between 28 to 29 years, and over 62 per cent of the population is between 15 and 59 years of age.
• As fertility declines, the share of the young population falls and that of the older, dependent population rises. If the fertility decline is rapid, the increase in the population of working ages is substantial yielding the ‘demographic dividend’.
• With falling fertility (currently 2.0), rising median age (from 24 years in 2011, 29 years now and expected to be 36 years by 2036), a falling dependency ratio (expected to decrease from 65% to 54% in the coming decade taking 15-59 years as the working age population), India is in the middle of a demographic transition.
• This provides a window of opportunity towards faster economic growth. India has already begun to get the dividend.
• In India, the benefit to the GDP from demographic transition has been lower than its peers in Asia and is already tapering.

What India needed to Reaping India’s demographic dividend?

Countries like Singapore, Taiwan and South Korea have already shown us how demographic dividend can be reaped to achieve incredible economic growth by adopting forward-looking policies and programmes to empower the youth in terms of their education, skills and health choices. There are important lessons from these countries for India. There are important lessons from these countries for India.

• The first is to undertake an updated National Transfer Accounts (NTA) assessment. Using NTA methodologies by Lee and Chen (2011-12) and M.R. Narayana (2021), we find that 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 a child in China consumes about 85% of a prime-age adult’s consumption.
• The second is to invest more in children and adolescents. India ranks poorly in Asia in terms of private and public human capital spending. It needs to invest more in children and adolescents, particularly in nutrition and learning during early childhood. Given that India’s workforce starts at a younger age, a greater focus needs to be on transitioning from secondary education to universal skiling and entrepreneurship, as done in South Korea.
• The third is to make health investments. Health spending has not kept pace with India’s economic growth. The public spending on health has remained flat at around 1% of GDP. Evidence suggests that better health facilitates improved economic production. Hence, it is important to draft policies to promote health during the demographic dividend.
• The fourth is to make reproductive healthcare services accessible on a rights-based approach. We need to provide universal access to high-quality primary education and basic healthcare. The unmet need for family planning in India at 9.4% as per the latest National Family Health Survey-5 (2019-21) is high as compared to 3.3% in China and 6.6% in South Korea, which needs to be bridged.
• Fifth, education is an enabler to bridge gender differentials. The gender inequality of education is a concern. 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. In Japan, South Korea, and Indonesia, the gender differences are rather minimal. This needs to be reversed.
• Sixth, India needs 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. New skills and opportunities for women and girls befitting their participation in a $3 trillion economy is urgently needed. South Korea’s has female workforce participation rate of 50%. It is predicted that if all women engaged in domestic duties in India who are willing to work had a job, female labour force participation would increase by about 20%.
• Seventh, 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, which are advanced in demographic transition, already have a higher percentage of older people. These differences in age structure reflect differences in economic development and health – and remind us of States’ very different starting points at the outset of the 2030 Sustainable Development Goals Agenda. But this also offers boundless opportunities for States to work together, especially on demographic transition, with the north-central region as the reservoir of India’s workforce.
• Eight, a new federal approach to governance reforms for demographic dividend will need to be put in place for policy coordination between States on various emerging population issues such as migration, ageing, skilling, female workforce participation and urbanisation. Inter-ministerial coordination for strategic planning, investment, monitoring and course correction should be an important feature of this governance arrangement.

Way Forward:

• Growth will depend on labour force those in the working-age population actually working.
• India’s labour force participation rate is declining, especially among rural youth (15- to 29-year-olds) and women. For India to harness the power of its favourable demographics, it is critical that the issue must be addressed.
• India’s labour force needs to be empowered with the right skills for the modern economy.

Source: The Hindu

Mains Question:

Q. Why India is losing out on harnessing its demographic dividend? What does India need to reap its demographic dividend? Illustrate.