Demographic Dividend Opportunity or Threat
In 1798, in his An Essay on the Principle of Population, Reverend Thomas Malthus posited that the human population growing at an exponential rate shall someday surpass the level sustainable by the arithmetically growing rate of food production.
This statement, which forms the crux of Malthusianism, argued for greater birth control measures to keep population in check. The 19th century, though not without its problems of population related urbanization, didn’t see Malthus’ premonition come to fruition and his argument seemed to have been laid to rest, albeit for half a century when in the wake of unshackling of slavery’s yoke by very many nations in the post war world, it was resurrected by the aptly named neo-Malthusians, including the likes of Paul Ehlrich (the Population Bomb) and the Paddock Brothers (Famine 1975!
America's Decision: Who Will Survive?)
Influenced by Soviet ideas, India was the first country to have an official population control policy in 1951. While the numbers would say that the policy hasn’t been successful, India has a population of 1.25 billion, the country has, by serendipity or by plan, reached a stage where the potential of its large population and the structure of it has become an important weapon in the country’s growing economic arsenal. The
Demographic dividend, as this weapon is popularly called, depends on the make-up of the population, particularly on the dependency ratio, which is the number of dependents in a population (Age 0-14 and 65 above) as a part of the working population. As of 2015 this ratio stands at 0.52 1 and with declining fertility and child mortality rates this could fall as low as 0.48 in the next decade.
What this number promises is lesser and lesser number of individuals to take care of for every working age individual. It promises a greater labour supply if we can skill them, greater savings for them if we can give them jobs and greater consumption if we can provide the goods that they need. A large supply of skilled labour, greater savings rate and increased consumption for the period in which this dependency ratio remains low enough shall usher this nation in to an era of increasing growth rates as it had done for countries like South Korea and Taiwan. A particular advantage not afforded to other countries is that since the decline in our growth rate has been slow the window of opportunity afforded to us is going to be longer compared to say countries like China. But there are too many ifs to get past before this window of opportunity is turned into tangible economic growth and a sea of unrest lies ahead in our failure to get past them.
Traditionally countries that have capitalised on their demographic dividend have followed the transition from an agricultural economy to a manufacturing based economy. As the percentage of GDP contributed by agriculture in countries like South
Korea decreased in the decades following 1960s, there was an increase in the contribution by manufacturing sector with a large number of people moving directly from agriculture to manufacturing. India has bucked this trend and has seen decline in agriculture with a significant increase in contribution by services (53% in 2015)2 while manufacturing has grown at a miserly rate and even declined in the past few years.

The service sector cannot sustain the increasing number of adult working population and the manufacturing sector suffers from structural weaknesses needing an immediate overhaul. The Make in India campaign is a step in the right direction but there are several legal impediments that have to be overcome to kick-start the sector into the right direction. Labour laws need to be changed to help the upcoming labour force, the Land Acquisition Act needs to be passed swiftly to solve infrastructural problems. Also, India needs to clean up its environmental laws, providing quick and reasonable clearances to important projects. Only if these issues can be rectified can manufacturing provide employment to an increasing population.
While the issue of creating employment has been part of the discourse for long, creating employable individuals has gained attention only in the recent past. While access to education for children below the age of 14 has been made a right under article 21A of the constitution, the implementation of the RTE Act which guarantees the right has been poorly handled. With Education being on the concurrent list, there has been constant clamouring between the Centre and the States regarding the allocation of funds. There is significant shortage of teachers in schools and the education curriculum requires a make-over to bring it to international standards. If the state of the primary education is bad, higher levels of education are in an even worse state. Reports state that only 25% of Indian IT graduates are employable3. Vocational and Technical training schools, which are supposed to be the suppliers of skilled labour for the yet to come manufacturing boom, are teaching outdated coursework and have only 5% capacity of the potential requirements. With such shortage in skilled labour the opportunity afforded to us by the demographic profile cannot be turned into economic growth. Education can be a bottleneck for growth and lack of it in an increasing number of people can be a cause of major unrest and dissatisfaction.
To ensure that a young population matures into a one capable of handling the rigors of the work place, a universal health care policy is of utmost importance. India has an abysmal performance in this regard with spend of 4% of GDP in 2013-14 as compared to 17% in the US and 5.6% in China4. The urban poor and rural areas which are the most severely afflicted groups have no primary health care facilities. A significant chunk of the working age population is going to be a part of this social demographic and lack of proper health care is going to compound the effects of lack of proper education and jobs. In order to reap the demographic dividend it is necessary that infants receive good medical care, women get basic reproductive health facilities and the health of children and teenagers is stressed in the household, to improve educational performance.
India’s diversity manifests itself not only in culture but also in its demographic profile.
There are wide inter-state, male-female and rural-urban disparities in the country stemming largely from poverty, illiteracy, and inadequate access to health and family welfare services. There are at least 9 states and union territories in India that have already achieved replacement levels of fertility (2.1 births per women). On the other end of the spectrum states such as UP and Bihar still have high fertility rates of 4.4

and 4.2 respectively5. A failure to address such wide imbalances is not only going to erode any possible demographic advantage but cause problems of mass urbanization due to migration leading to social unrest, crimes and cultural clashes. Increased levels of inter-state migration in pursuit of economic gains have already been seen in the last two decades with Uttar Pradesh and Bihar being the main contributors of out migration and Maharashtra, Gujarat and Delhi being the major attractions to them. Increased urbanization is going to throw challenges of Planning and Governance in the near future and the country must prepare itself to tackle them head on. 30% of India’s population resides in urban areas, and if current rates of migration continue 40% is projected to live in urban areas by 2030. The challenge of urbanization is twofold – economic and social. The economic challenge involves providing employment to a labour force that has travelled large geographical distance for better opportunity and if properly handled can be turned into an advantage. The social aspect of the problem caused by the mingling of an affluent urban centre with poor peripheral ghettos is going to lead to an increased crime rate and social unrest. This conjecture is corroborated by the fact that cities that attract economic power and foster growth such as Delhi,
Bangalore are now the hub of crime and violence which drastically debilitate development. This may be attributed to widening inequality, poverty, improper urban planning, ever-increasing burden on urban infrastructure, proliferation of slums and poor neighbourhoods, and the not-so-perfect judiciary and legal system of the country.
A painful feature of India’s demographic profile is how imbalanced it is against the female gender. India’s labor force participation rate (LFPR) on the base of the cohort of people in the 15-59 years age range stands at 66.3 per cent6 (i.e. out of 730 million people in the age range of 15-59 years, only 484 million are looking for employment actively). Further segregating this ratio into men and women brings the LFPR at 94 per cent and 37 per cent respectively in 2011. This clearly shows that the Indian women are far less likely to participate in the workforce as compared to the Chinese woman. While Indian and Chinese men exhibit similar LFPR, if we compare agespecific LFPR for Chinese and Indian women (with generous addition of home-based activities), the results show Indian women in all age groups substantially lagging behind their Chinese counterparts. If we take this new data into consideration and recalculate the dependency ratio for the year 2030, it will be 0.89 for China as compared to 1.26 for India. This hardly provides a reason to be sanguine about the potential for realising the demographic dividend.
The assumption in calculating the new dependency ratio above was that low LFPR amongst women in India would continue. Now the question is whether such an assumption is valid? It has been seen in various countries that economic growth is associated with rising female education levels and falling fertility, both of which ideally should contribute to a higher LFPR of women. But Ether Boserup’s classic work notes the U-shaped relationship between economic growth and LFPR of women. With economic growth, the importance of agriculture declines, an area where women are concentrated, resulting in declining female LFPR until economic growth is strong enough to provide alternate opportunities. While rising education level and declining

fertility both generate conditions that should increase female labour supply. But quite counter intuitively, the urban Indian woman is relatively less likely to participate in the labour market. In fact, these proportions have not materially changed for the past two decades. On the contrary, education in India appears to be associated with lower rather than higher LFPR amongst women in India. Part of this is may be because educated women are more likely to be engaged with men earning higher incomes, thus reducing the need for them to join the labour force. Another reason is the unavailability of skilled work as per their requirements. Gender discrimination in earnings is also another factor reducing the female employment numbers. As per a recent study the urban women earns 68 paisa and rural women earns 54 paisa per rupee earned by men. But achieving pay parity also has its consequences as can be seen by the implementation of same minimum wage requirement for both men and women in rural areas. This led to workers with low productivity being priced out of the market, reflecting in fewer employment opportunities for women. Hence not only should we provide them with new opportunities but also help them to increase their productivity, only then we can find a positive impact coming out of their contribution.
The present status of education, skill development, health and female work participation doesn’t bode well for the future but there is recognition of the fact by the present state that there are deficiencies and policies have and are being framed to overcome them. It is the implementation of these policies that has been our plight in the past and hopefully the nation is going to succeed this time in utilising this window of opportunity which shall usher the greater masses into an era of prosperity. The extent to which India reaps the benefits of its demographic gift in the future hinges on whether the country can turn its large working-age population into a healthy equitable
& employable force.

References
1. India Demographics Profile. Available from [26 January,
2016]
2. Sector-wise contribution of GDP of India. Available from

[26 January, 2016]
3. India’s Demographic Dividend: Asset or Liability? Available from [26 January, 2016]
4. Health expenditure, total (% of GDP). Available from [26 January, 2016]
5. Appendix III. Available from
[26
January, 2016]
6. The Other Half of Demographic Dividend; Economical & Political Weekly. 2010
Oct 2; 45(40): 12–1 http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3381360/