India risking demographic dividend

• The World Bank has warned that the South Asia region including India was not making use of its demographic dividend as the pace of job creation in the region.
• It will led to fell short of growth in the working-age population, even as it projected a strong 6.0-6.1% growth for 2024-25 for the region in its South Asia regional update, Jobs for Resilience

Key highlights

• Observing that India’s employment growth was “well below” the average growth in its working age population for the 2000-23 period.
• The multilateral lender said consequently the country’s employment ratio had declined more than in any other country in the region except Nepal up till 2022.
• Noting that India’s economy was expected to post a “robust growth” of 7.5% in FY23/24, the lender said this growth coupled with recoveries in Sri Lanka and Pakistan, was largely driving the strong numbers for the South Asian region.
• Still, the region could have 16% higher output growth if the share of its working-age population that was employed was on a par with other EMDEs
• “South Asia is failing right now to fully capitalise on its demographic dividend, This is a missed opportunity.
• The weak employment trends in the region were concentrated in non-agricultural sectors.
• To encourage job growth the Bank recommended supporting the participation of women in the economy, increasing openness to trade, and improving education.

Demographic dividend

• It is as defined by the United Nations Population Fund (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)"

Status of India’s demographic dividend and challenges

• The Lancet report is a message that India’s demographic dividend is not for perpetuity.
• Global experiences could be illustrative for the country’s policymakers.
• In China, for instance, the proportion of the working age population crossed 50 per cent in 1987 and peaked around the middle of the last decade.
• This was also the period when the country registered impressive economic growth.
• By last year, China’s TFR had dropped to a record low and its working-age population had contracted by more than 40 million.
• The Chinese government’s pro-population-growth measures do not seem to be working.
• In fact, the last 60 years’ history of developed nations suggests that once fertility rates fall below the replacement rate, it’s almost impossible to set them back.
• At 1.9, India’s TFR is currently just below the replacement rate, and according to UNPF calculations, the share of the country’s working-age population will peak in the late 2030s, early 2040s.
• Policymakers must, therefore, utilise this window to maximise India’s demographic dividend, as China did from the late 1980s till the early years of the last decade.
• No time must be lost in putting in place measures to overcome skill deficits and plug gaps in the knowledge economy.
• The challenge will also be to generate jobs outside of agriculture — they must not be in the low-paid informal sector.
• Going ahead, policymakers will also have to ensure adequate social security and healthcare provisions for the growing elderly population and create opportunities to harness their skills effectively.

Prelims Takeaway

• Demographic dividend
• TFR