India's Demographic Dividend

WHY IN NEWS?

Several experts have raised concerns over the demographic dividend of India potentially becoming a demographic burden.

WHAT IS DEMOGRAPHIC DIVIDEND:

• According to United Nations Population Fund (UNFPA), demographic dividend means "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 years) is larger than the non-working-age share of the population (0-14 years and 65+ years)".
• In simple terms, demographic dividend is the economic advantage a country possesses due to its high working age population and low dependency ratio.
• This advantage can create the space needed to increase investments in enhancing human capabilities, which, in turn, can have a positive influence on growth and development.

TRENDS IN INDIA’S DEMOGRAPHIC DIVIDEND:

• India has one of the youngest populations in an aging world. By 2020, the median age in India will be just 28, compared to 37 in China and the US, 45 in Western Europe, and 49 in Japan.
• At present, India has a large proportion of population that is young:
  • Close to 30% of India’s population is in the age group 0-14 years.
  • Elderly (60+ years) population accounts for 8% of the country’s population.
  • The working age group 15-59 years accounts for 62.5% of India’s population and will reach the highest proportion of approximately 65% in 2036.
• The window of demographic dividend opportunity in India is available for five decades from 2005-06 to 2055-56, longer than any other country in the world.

• This demographic dividend window is available at different times in different states because of differential behavior of the population parameters.

 

POTENTIAL BENEFITS OF THESE TRENDS:

Demographic dividend can increase economic growth through several channels. These include:

• Through the swelling of the labour force, as more people reach working age.
• Increased fiscal space created by the diversion of resources from spending on children to investing in physical and human infrastructure.
• Rise in women’s workforce that naturally accompanies a decline in fertility, and which can be a new source of growth.
• Increase in savings rate, as the working age happens to be the prime period for saving. Additional boost to savings that occurs as the incentive to save for longer periods of retirement increases with greater longevity.
• Increase in consumption by the new middle-class society. Growth, education, home ownership, better economic security and a desire for more durable goods are the cause and consequence of young demographics.

CHALLENGES:

• Economic slowdown:
  • Since 2010-11, the net financial savings of households (their fixed deposits, insurance policies, mutual funds, small savings, etc.) has been falling. People have been consuming a greater proportion of their income and also borrowing more to finance consumption.
  • The lack of confidence in the economy has also pushed down the rate of investments. Hence, adequate job creation is not happening. This was evident in the National Sample Survey Office’s Periodic Labour Force Survey, which shows unemployment at 6.1 %.
• Asymmetric demography:
  • Due to regional differences in growth rates and differential success in population policies, the demographic growth is likely to be concentrated in the northern states of India. At the same time, the southern states will see a rise in geriatric population.
  • This creates challenges in formulating effective policies for the population.  
• Lack of employable skills:
  • India is home to the world’s largest concentration of illiterate people in the world. Also, India has but 4.69% of formally trained people in its workforce.
  • As most of the future jobs that will be created will be skill intensive, and lack of skill in Indian workforce is a major challenge.
• Fragmented skill training system:
  • The present system of education has become obsolete to meet the demands of the market. Skill training continues to remain secondary to rote learning.
  • Vocational training remains neglected in India. Linkage between industry and academia is non-existent.  
• Poor socio-economic parameters:
  • India ranks 130 out of 189 countries in UNDP’s Human Development Index, which is alarming. Therefore, health and education parameters need to be improved substantially to make the Indian workforce efficient and skilled.
  • Issues arising out of the patriarchal Indian society, like gender bias, early marriages and limited role of women in decision making continues to hinder the effective realization of full demographic potential.

Figure 1 An illustration of the impact of social-economic system on realizing demographic dividend

• Dominance of informal economy:
  • Informal nature of economy in India is another hurdle in reaping the benefits of demographic transition in India. 90% of Indian economy is informal in nature.
  • Factors such as lack of social security cover, limited avenues for skill training and exploitation of workforce reduce the scope of effective realization of the benefits of demography.
• Jobless growth
  • As per the NSSO Periodic Labour Force Survey 2017-18, India’s labour force participation rate for the age-group 15-59 years is around 53%, that is, around half of the working age population is jobless.
  • This means that despite being the fastest growing economy in the world, India is not creating enough jobs for its rising population.

 

MAJOR GOVERNMENT INITIATIVES:

I. HUMAN CAPITAL DEVELOPMENT:

• Skill India Mission:
  • Skill India Mission was launched with an aim to train over 40 crore people in India in different skills by 2022.
  • It includes various initiatives of the government like “National Skill Development Mission”, “Pradhan Mantri Kaushal Vikas Yojana (PMKVY)” and the “Skill Loan scheme”.
  • The mission seeks to create a synergy between education, training and work in order to enable them to build a stronger India.
• Pradhan Mantri Kaushal Vikas Yojana:
  • It is an outcome-based skill certification scheme implemented by National Skill Development Corporation (NSDC).
  • The objective is to enable Indian youths to take up industry-relevant skill training that will help them in securing a better livelihood.
  • The various components are short term training, recognition of prior learning, special projects, Kaushal and Rozgarmela, placement guidelines and monitoring guidelines.
• SANKALP & STRIVE:
  • Skills Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) aimed at providing market relevant training to youths across the country.
  • Skill Strengthening for Industrial Value Enhancement (STRIVE) aimed at improving the quality and the market relevance of vocational training provided in ITIs.
  • Both Schemes are under the Ministry of Skill Development and Entrepreneurship and supported by World Bank loan assistance.
  • The two schemes will help in setting up a national body -Vocational Education and Training (VET), which shall regulate accreditation and certification in vocational training.

II. EMPLOYMENT GENERATION:

• Start Up India Scheme:
  • It aims at fostering entrepreneurship and promoting innovation by creating a conducive ecosystem Start-ups.
  • It does the same through self-certification schemes, single point clearances, easy patenting system, legal and financial supports.
• Make in India:
  • Make in India is a new national program designed to transform India into a global manufacturing hub. The focus of the programme is on creating jobs and skill enhancement in 25 sectors.
• UDAAN:
  • The programme aims to provide skills training and enhance the employability of unemployed youth of J&K.
  • The key stakeholders are Ministry of Home Affairs (MHA), State Government (Jammu & Kashmir), Corporates and National Skill Development Corporation (NSDC).

III. SOCIAL SERVICES:

• National Health Policy 2017:
  • Aims to attain universal health coverage and deliver quality health care services to all at affordable cost.
  • Features:
    • Gradually increase public health expenditure to 2.5% of the GDP, with two-thirds of resources to be allocated to primary care.
    • To provide a larger package of assured comprehensive primary healthcare through the ‘Health and Wellness Centers’
    • Proposes development of infrastructure, free drugs, free diagnostics and free emergency and essential healthcare services in public hospitals.
    • Attain targeted reduction in indicators such as mortality, fertility rates etc.
• Ayushman Bharat:
  • ABY or National Health Protection Mission is a national initiative launched to achieve the vision of Universal Health Coverage.
  • Comprises of two components:
    • Pradhan Mantri Jan Arogya Yojana (PMJAY): It aims to reduce out of pocket expenses by providing health insurance coverage upto Rs.5 lakh/family/year for secondary and tertiary care hospitalization.
    • Health and Wellness Centre: Aim to provide preventive, rehabilitative and curative care for an expanded range of services encompassing reproductive and child health services, communicable diseases, non-communicable diseases, palliative care and elderly care, oral health, ENT care, and basic emergency care.
• National Health Mission:
  • The NHM envisages achievement of universal access to equitable, affordable & quality health care services that are accountable and responsive to people's needs.
  • NHM comprises of both National Rural LIvelihood Mission and National Urban Livelihood Mission
  •  
  • Seeks to attain several targets such as reduction of MMR, IMR, Total Fertility rates, prevalence of Leprosy, Malaria & TB and elimination of Kala-Azar.
  • The NHM encompasses its two Sub-Missions, the National Rural Health Mission (NRHM) and National Urban Health Mission (NUHM).

• Draft New Education Policy, 2019:
  • The draft Policy was developed based on Dr. Kasthurirangan committee recommendations.
  • It proposes radical restructuring of the present education system.
    • The Draft Policy reaffirmed the commitment of spending 6% of GDP as public investment in education. 
    • The policy calls for an Early Childhood Care and Education (ECCE) as an integral part of school education.
    • A 5+3+3+4 curricular and pedagogical structure based on cognitive and socio-emotional developmental stages of children was proposed.
    • It recommends that multiple public schools should be brought together to form a school complex.
    • Special focus on skill development and vocational training at school level.
    • It proposes setting up the National Higher Education Regulatory Authority (NHERA), which would replace the existing individual regulators in higher education, including professional and vocational education.
    • Recommends creation of a National Education Commission or Rashtriya Shiksha Aayog, as an apex body for education.
• SWAYAM:
  • Study Webs of Active Learning For Young Aspiring Minds is an indigenous IT platform for hosting the Massive Open Online Courses (MOOCs).
  • The objective is to take the best teaching learning resources to all, including the most disadvantaged. This is done through an indigenous developed IT platform that facilitates hosting of all the courses to be accessed by anyone, anywhere at any time.
  • It covers diverse disciplines such as arts, science, commerce, performing arts, social sciences and humanities subjects, engineering, technology, law, medicine, agriculture etc. in higher education domain.

IV. LEGISLATIVE MEASURES:

• Consolidation & Codification of labour laws:
  • To enhance ease of doing business in the country and encourage formalization of labour force, the government has initiated the process codification of various central and state labour laws into codes—on wages, industrial relations, social security and safety, health and working conditions.

WAY FORWARD:

• Whether the demographic dividend promotes growth or transforms into a curse depends on how prepared the states that should benefit from a young population are.
• Realizing a demographic dividend requires multiple investments. The most essential are building the capabilities of people and ensuring their rights and freedoms to achieve their potential. For the same:
  • Public spending and investments in health and education needs to be improved to globally recommended levels.
  • Skill development must be made an essential part of the curriculum. Private entities must be encouraged to set up skill training avenues. An effective skill development policy, linking all major stakeholders such as academia, industry, labour force and governments needs to be established.
• Employment avenues must be enlarged in the country to meet the rising population. Entrepreneurship holds the key to this. For this, initiatives like Startup India and make in India needs to be expanded, especially to novel areas such as AI, big data, blockchain, space technologies and clean energy.
• To overcome the asymmetry in demography, regional plans rather than a centralized policy should be developed. Also, the Population policy should be revised to take into account the regional differences in population growth.
• Focus should also be given on tapping the potentials of second demographic dividend, especially in the southern states. It refers to the potential demographic dividend that arises due to adult longevity. For this, measures like post-retirement career development, improved social security through pensions etc. needs to be looked into. 

                                        

Figure 2:A simplified framework to reap demographic dividend

 

Practice Question

Q. A relook into the existing strategies is crucial to prevent the demographic dividend from becoming a demographic burden. Discuss?