Demography can be defined as the study of human populations- their size, composition and distribution and its development over time. India’s demography is at a unique turning point. India has 62.5% of its population in the age group of 15-59 years which is ever increasing and will be at the peak around 2036 when it will reach approximately 65%. A higher working population means more production, more productivity for the nation as a whole and low dependency rate. However, this demographic advantage can turn into a liability, if not managed well. Factors like unskilled labourforce, lack of employment opportunities, lack of quality education, gap between education curriculum and demand of the industry and gender discrimination in employment can affect the productivity of India’s demographic advantage.
There are positive implications to be seen if the demographic advantage is converted into a dividend but negative implications if it is left to turn into a liability-
Positive implications-
• Better economic growth brought about by increased economic activities due to higher working age population and lower dependent population. It will be channelised in following ways:
• Increased Labour Force that enhances the productivity of the economy.
• Increased fiscal space created by the demographic dividend to divert 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 also happens to be the prime period for saving.
• Rapid industrialisation and urbanisation because of higher number of employment seeking population that would force higher economic activities.
• Rise in workforce: With more than 65% of working age population, India will rise as an economic superpower, supplying more than half of Asia's potential workforce over the coming decades.
Negative Implications of demographic liability-
• Increased dependency rate- An unproductive young demography can turn into dependent individuals without any productive jobs. This has both economic and health implications for an economy.
• Increase in crime rate- As per national crime records bureau, the crime rate is higher in states with higher rate of unemployment and more young population in the age group of 15-59 years of age. If left unutilized, the youth can become a burden on the state infrastructure by increasing crime in the country.
• Industrial collapse- Capital intensive industries cannot transform a country into a manufacturing power horse. India has already jumped the growth chain by missing its industrial growth. If its demography is left unskilled, the industrial sector is bound to be exported to competing nations like Bangladesh and Vietnam.
• Fall in savings rate- the cycle of savings and borrowings provide the basis of growth in a country. Without adequate liquidity of savings, the banking system collapses. If majority of India’s working population is not able to work and save, the banking and financial system might collapse A large labour pool with wide cross-country divergence could be perceived as a double-edged sword by many, underscored by challenges of low skill development, weak labour market indicators with the addition of nearly 10 mn people to the workforce every year. However, in our view, schemes like Startup India and Make in India, and the recent potential shift in the global order towards more foreign investment in India (which could aid in absorbing our large labour force), could turn these into comparative advantages for a country like India.
To conclude, India continues to be on the right side of the demographic transition that gives us an opportunity to bolster socio-economic development and emulate the experience of other nations (at similar stages of demographic transitions in the past). Requisite investment in human capital, skill development and state-specific policies could bolster this process further. The government’s identification of policies to address these specific issues are steps in the right direction that will lead us to strong economic growth in the ensuing years.