NEWS

‘INDIA’S DEMOGRAPHIC DIVIDEND’ A fable or a Reality?

Abstract

The  Indian government in 1954 was the first country in the world that National Family Planning Programme formulated but unfortunately the program would not reach his goal and the population in India has continued to increase while other countries like USA, JAPAN etc. has attained a lot of stability. And this failure by India to the front of the population now works as an opportunity that we as demographic dividend. More and more people are expected to work during this period, the age group. i.e younger people. There is huge optimism with regardto this demographic bonus India would take to new heights, but people will just more does not mean that this demographic dividend, a young unemployed people, unskilled workers are the other part of coin, which is a challenge in achieving economic growth.

The developing countries like India are through a transition phase where the economy  of agricultural  shifts industrial production and the growth of the tertiary sector.  Several industries have completed in large part of so called – dempgraphic transition. There is a big doubt as to the extent to which we will be able to take advantage of this demographic dividend. The paper aims to give a true picture behind the demographic dividend  and to understand the various challenges to the apparently favourable demographic  setting in the various states of the country and even try to understand the ways in which the india can overcome these challenges and take the maximum benefit from demographic bonus.

Keywords: Demographic Dividend, Demographic Transition.

 Introduction

The Indian government in the year 1952 was one of the first few countries in the world that formulated National Family Planning Programme inorder to promote a small family norm control the population . But that programme failed big time and could not achieve its objectives and so the population continued to rise in the years 1960s , 70s and 80s. At the same time, china contrary to this strictly pursued ‘one child norm’ and so reduced the birth rate that ultimately reduced the growth rate. But India’s failure back then on the population front is now turning into an opportunity which we call as “ Demographic Dividend’’[1].

Some demographers believe that due to the decline in the birth rate in the developed country, the population between the age 15 -59 that mainly comprises of the work force would reduce and in the coming years there will be an increase in the old age population. It is believed that because the population of old would be more, there would be more burden of pension and old age benefits. And when such a predicament would arise , these countries would have to resort to the oversees workforce that is enthusiastic, young and energetic. Here comes the country called India where the working working population would be maximum between 2020 – 2050.

India has its place amongst the youngest nations in the world . As per the official data even after the next 15 years half of the country’s population would be below the age of 30. According to the Indian Labor Report, 300 million youth is expected  enter the labour force by the year 2025.

But it may be a mirage in the desert because the demographic does not only  mean more people whereas it means more prosperous and productive people. An unemployed and uneducated youth cannot reap the advantage of the demographic dividend. Presently the Indian workforce is mainly unskilled and uneducated . For India to derive the advantage of increased youth it has to be educated and equipped with the skills .  This article seeks to analyse the present condition of the youth, the challenges that it will face and the steps that can be taken to combat these challenges and take the advantage of this demographic change.

 Demographic Dividend is the rise in the rate of economic growth due to rising share of working age people in a population[2]. This happens due to  the falling birth rate and the consequent shift in the age structure of the population towards the adult working ages. It is also known as demographic gift or bonus or even demographic window. The Demographic transition process mainly comprises of three phases :

In the first phase, the fertility is very high and mortality declines due to which there are a large number of people in the young age group specifically below 15 years thereby creating a high dependency ratio.

In the second phase, the fertility declines at a  fast pace which leads to reduction in the child population . However as a result of high fertility in the past, there is high growth rate in the working age population in this period .This second phase is what we are focusing on that is the demographic gift or demographic bonus. There is considerable reduction in the dependency ratio during this period.

In the third phase the dependency ratio is again high due to high old age population because of old age pensions and other health benefits.

 The whole world has its eyes on the demographic bonus that India is expected to have and the benefits that are expected to accrue . So for this , it is important to know few factors that mediate the relationship between age structure transition and economic growth.

  • Increased  Savings:

The savings are expected to increase due to low dependency rate and even due to increased life expectancy . The major proportion of the savings is contributed by the households. In the other way it can even be said that the increased saving is not due to large number of adult members but due to few children .

  • Increased female participation

As the fertility declines , more women  enter into the labour market during this stage. This would ultimately result in increased economic activity and hence would spurt the economic growth.

  • Better health

Studies suggest that when children are few in number, families invest more on their own health thereby leading to better productivity and  thus better economy

  • Reduced Public Spending

As the number of children reduces, the public spending done by the government in the form of basic education and other benefits like mid day meal also reduces .So now the government also is in a position to invest in other activities in the international platform.

So it would not be wrong to say that economic advantage of demographic dividend is primarily achieved at the micro level (household) and later gets expanded to macrolevel advantage“As recently as the early 1990s, India was as rich [as China], in terms of national

income per head. China then hurtled so far ahead that it seemed India could never

catch up. But India’s long term prospects now look stronger. While China is about to

see its working age population shrink, India is enjoying the sort of bulge in manpower

which brought sustained booms elsewhere in Asia. It is no longer inconceivable that

its growth could outpace China’s for a considerable time.”.[3]

Although India is perceived by European investors as a nation that has a large , potentially restless pool of unemployable youth, Various multinational companies are eyeing india as a massive investment destination over the next few years , But what we actually have to offer them is an uneducated, unskilled work force. To gain the benefits , it is high time that India must impart required skills to the workforce and educate it and ensure that it is healthy.

 

 

 

Demographic Bonus ??? : A highly debatable issue

Is demographic dividend a myth or a reality is currently a highly debatable issue. In many Asian Countries , aging population are now causing , or are about to cause , a decline in the working age ratio . The japanese workforce has been shrinking since 1995, and the Korean would  start to decline from 2015 . China’s working age ratio will rise  in 2013 and then decline by a substantial amount in the next few decades,the second most populous country in the  the world affords grounds for cautious optimism. India’s demographic transition is presently well underway, and the age structure of the population here  is likely to evolve favorably over the next two to three decades.[4]

Some envision the country exporting armies of skilled labor to the world while some are anxious about the generation of unskilled Indian workers left behind .Inorder to make manufacturing a genuine rengine of growth and progress , the government of India has announced new policies as part of the 12th five year plan i.e. from 2012 – 2017 and it aims to create 100 million work opportunities by 2022. When we talk about demographic window, employability issue takes a big place in india with strong arguments from both the sides Nasscom ( National Association of Software and Services Companies in its study said that only 25% of IT graduates are employable whereas as per  (AICTE) i.e. All –India Council for Technical Education every year , one million engineering graduates and diploma holders enter in the workforce.

 But the problem is not just for India but for the entire world ,” there is a huge gap in almost all countries between what the educational system feels it provides and what employers think they get. In the U.S., 87% of the education providers answered the question, “Are graduates adequately prepared?”  in the affirmative, while only 49% of the employers agreed. India actually scored better, with figures of 83% and 51%. The gap was the widest in Germany followed by the U.S. “Seventy-five million young people — 12.6% of global youth — are unemployed yet only 43% of employers report there are enough qualified entry-level candidates,”.[5]

The Fabled demographic dividend we all are looking forward to is an opportunity that seeks investment if not invested on education and training,  very soon our land would not be able to bear the weight of its children and for that people of our country will have to  look for work in other countries, But situation in the other country would also be worse because by that time few countries would want unskilled labours . Therefore it is high time that we come up with plans, put them into action and keep a follow up on its implementation

Present Scenario

Inorder to convert the potential into kinetic i.e. inorder to utilise this opportunity, two things that play a very pivotal role is the education system in India and even the health status . So for total understanding about the demographic dividend , let us look into the two most important pillars of demographic bonus.

Education:

The large number of Indian schools are of poor standard, teachers are inadequately prepared, they themselves have low motivation level as they are very poorly paid and this leads to increased absenteeism and later results in attrition. The state of higher education is even more pathetic as the overall quality of the higher education  is way below than the global standards. Employers of the big multinationals often complaint about the Indian graduates that they are inadequately trained and they need to be “re- educated ”. The Indian youth today attends low standard colleges that are less of institutes that impart knowledge but more of degree mills. Public spending on education is still to reach 6 percent of GDP , this is a demand that we kept before the british  government and it is not fulfilled till date. Though we have various policies to upgrade the education system but all that is barely on papers because the actual results show nothing. And if we don’t work on our present education system, we will indeed produce world class labour for the world market but that would be for sweepers, domestic help, taxi drivers and so on

Health:

For us to take the benefit out of the demographic bonus it is important that the youth is healthy but the health sector also suffers , the expenditure on health has barely reached 2 percent of the GDP, which is  way below than the adequate to provide proper  health facilities to every citizen . Majority of the children that happen to be the future work force are largely malnourished .  Every year,various communicable and non communicable diseases take heavy toll in India . Healthy population is a must not only for demographic bonus but even for the nation’s own growth.

Therefore India really needs to push hard on educational and health fronts to imbibe the requisite skills in its workforce so that they  become competent and employable  force in the international front.

 Like every opportunity  comes with  responsibility, the same has come to india in the form of demographic window. On one hand investment is required to generate employment and on the other hand skill deficit has to be met to enable the people of the country to benefit from such opportunities. Investment in education becomes a pre- requisite to generate investment in any other sector of the economy.

 

 

 

 

 

 

 

Possible Solutions (Suggestions)

 

  • Investment in vocational education

The fastest way is to invest in ‘vocational ’ education to make the human resource employable and ensure inclusive growth. The government by diverting some money that is spent on subsidies where there is no multiplier , to vocational training would be a great move. The very basic idea behind this is to train the underemployed and train them to be job – ready or to start some business to earn their livelihood. Training programs like being a mechanic , plumber, carpenter , nurse and so on would definitely make people skilled. Such training would not even take much time as it is something that can be taught in three- six months. After the training , they can be connected to some employment agency so as to place the certified people in jobs.

 

  • Reduction in inflation and cost of capital

It is imperative that inflation comes down and even the cost of capital for small business reduces. And this requires  a massive supply side response that can be through massive development in infrastructure and removal of all bottlenecks but the question that arises is that where can we get the capital from and to that question, my response would be “China”. China has a huge capital deployment problem and a large part of the capital it deploys domestically returns but less than the cost of capital . So this should be recognised by india and we should try to normalise our relations with China . As both the countries are in need of each other .

 

  • Unlocking of Unproductive Assets

India must unlock its unproductive assets like gold and property. When gold is purchased and kept, it blocks the flow of money similarly the investment in property is also unproductive. So the government must curtail the flow of capital into gold and property . They attract people because they are repositories for unaccounted wealth and therefore apart from blocking the flow of money, leads to increase in corruption as well.

CONCLUSION

The demographic dividend story is far from begun, rather than taking it as a bonus it should be taken as an opportunity that has to be trapped. Various reports suggest that by the year  2020, the average Indian is expected to  be only 29 years of age as compared to  37 in China and the U.S., 45 in Europe, and 48 in Japan, which means that  India will experience an age advantage for at least three decades, till  2040. So it can be said that   if Indians skill themselves to suit the future demand for jobs both domestic and abroad, India will soon become a superpower defeating all other countries of the world.

 It should be noticed that there lies a paucity  of adequate and proper  communication and collaboration between the government, academia and industry in the country.  And this can be substantiate dby saying that business has changed drastically in the past 10 years but  the curriculum in educational institutions is just  same as it was a couple of decades ago. And the entire  process of  incorporating  any change in the curriculum is so tedious lengthy that it simply gets bogged down. What we actually need is a strategy of three Es — education, employability and employment. But for now we need to focus on education that will ultimately take us to employment and great productivity.

 Manish Sabharwal who happens to be the  chairman of TeamLease Services, a leading human resource services provider said  that skill development is only one part of the solution. He said that there are  basically three problems in the current Indian system and they are :matching supply with demand, repairing the  supply for demand and preparing supply for demand and  what we are all focusing  on in terms of employability  is only the repair part. And this  repair pipeline would run dry if the pipeline is not prepared by way of educational changes and reforms . And that is something that the government and academia need to work on. There has to be synergy between the government, the various big companies and even the education system.

For us to realise the  demographic dividend , what  we need is  a clear sense of our national education strategy, which must help us in defining  the role and goals of the participants in the industry. The  Universities in our country  need clear  simply designed , realistic and achievable goals, the schools at the same time need  incentives to achieve  their targets and the skill developers need  a sense of the mission.  It is correctly said that an unemployed will inevitably prey on itself and on others, therefore it becomes the need of the hour to ensure that all steps are taken, all plans made are incorporated and followed up so as to make the most out of this opportunity as we count on the dividend but we hesitate in investing on the same. So taking lessons from the past and experiences from the various countries, India should take steps towards optimum or  maximum utilisation of this opportunity. But we cannot forget that this opportunity seeks investment. If we are counting on the demographic dividend then we must not hesitate in investing on the demographic by way providing better health and better education . this can be achieved only with co-operation between industrialists and the government.

“If India failed to improve the quality of its workforce, it may find hard to provide gainful employment to such a large chunk of unskilled workforce not just in overseas markets but in India also as most of the future jobs will be of skilled nature in or outside India. Therefore if India failed to increase the productivity of its workforce, the demographic dividend may eventually turn into a demographic catastrophe or demographic nightmare”[6]

References:

[1] Coined by David Bloom

[2] Glorifying Malthus: Current Debate on ‘ Demographic Dividend’ in India; K S James presented at Institue for social and economic change , Bangalore.

[3] The Economist (August 21-27, 2010)

[4] “Asia and the Pacific :Managing Spillovers and Advancing Economic Rebalancing”, International Monetary Fund paper , April 2012., 89-94.

[5] McKinsey Report  (2011)”Education to Employment: Designing a System that works “

[6] http://www.mbarendezvous.com/topimage.php?id=293

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