Demographic Dividend

What Is a Demographic Dividend?

A demographic dividend refers to the growth in an economy that is the result of a change in the age structure of a country’s population. The shift in age structure is typically brought on by a decline in fertility and mortality rates. A demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to the growth of the economy. More than 63% of the population in India is in the age group of 15-59 years, broadly termed India’s demographic dividend.

  • While most countries have seen an improvement in child survival rates, birth rates remain high in many of them, particularly in lesser developed countries. These countries, therefore, rarely enjoy an economic benefit known as the demographic dividend.
  • Demographic dividends are occurrences in a country that enjoys accelerated economic growth due to the decline in fertility and mortality rates.
  • A country that experiences low birth rates in conjunction with low death rates receives an economic dividend or benefit from the increase in productivity of the working population that ensues. As fewer births are registered, the number of young dependents grows smaller relative to the working population.
  • With fewer people to support and more people in the labour force, an economy’s resources are freed up and invested in other areas to accelerate a country’s economic development and the future prosperity of its populace.
  • To receive a demographic dividend, a country must go through a demographic transition from a largely rural agrarian economy with high fertility and mortality rates to an urban industrial society characterized by low fertility and mortality rates.
  • In the initial stages of this transition, fertility rates fall, leading to a labour force that is temporarily growing faster than the population dependent on it. All else being equal, per capita income grows more rapidly during this time too.
  • This economic benefit is the first dividend received by a country that has gone through a demographic transition.
  • The benefits gotten from a demographic transition are neither automatic nor guaranteed.
  • Any demographic dividend depends on whether the government implements the right policies in areas such as education, health, governance, and the economy.
  • In addition, the amount of demographic dividend that a country receives depends on the level of productivity of young adults which, in turn, depends on the level of schooling, employment practices in a country, timing, and frequency of childbearing, as well as economic policies that make it easier for young parents to work.
  • The dividend amount is also tied to the productivity of older adults which depends on tax incentives, health programs, and pension and retirement policies.

There are four main areas where a country can get a demographic dividend

  1. Savings—During the demographic period, personal savings grow and can be used to stimulate the economy.
  2. Labour supply—More workers are added to the labour force, including more women.
  3. Human capital—With fewer births, parents are able to allocate more resources per child, leading to better educational and health outcomes.
  4. Economic growth—GDP per capita is increased due to a decrease in the dependency ratio.

Challenges before India in realising the benefits of demographic dividend

Poverty: MPI India rank was last released in September 2021, when India ranked 66 out of the 109 countries that are assessed in the survey. Nearly 1.3 billion people were found to be multi-dimensionally poor under this index

Poor quality of education: At the primary level ASER 2018 showed that in grade 5 after more than four years of schooling, only half of all children could read a grade 2-level text fluently.

On the other hand, Less than half of the Indian graduates are employable, reveals the eighth edition of the India Skills Report (ISR) released today. In 2021, as many as 45.9 per cent of graduates are employable.

Poor health infrastructure: The doctor-to-patient ratio remains abysmally low, which is merely 0.7 doctors per 1,000 people. This is compared to the World Health Organisation (WHO) average of 2.5 doctors per 1,000 people. Patients pay 65 per cent of medical expenses in India out of pocket.

Employability ChallengeOver 30% of youth aged 15-29 in India are not in employment,
education or training (NEETs). This is more than double the OECD average and almost three times that of China. NEET status of youths results due to not enough quality jobs being created in
the system and because youths have few incentives or face too high constraints to be in the education and training systems

Weak secondary sector: Indian manufacturing sector contributes only 17% to its GDP, poorly developed manufacturing sector leads to unemployment in the country because this is the labour-intensive sector.

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Gender disparity: In India, where it is estimated that over 70 per cent of rural women work as agricultural labourers, only 14 per cent of agrarian landholders are women and they roughly own only 12 per cent of the total operational land holdings.

Income inequality: The top 10% of the Indian population holds 77% of the total national wealth. 73% of the wealth generated in 2017 went to the richest 1%, while *670 million Indians who comprise the poorest half of the population saw only a 1% increase in their wealth. this inequality restricts the masses from participating in nation-building.

Casteism: The caste system of stratification restricts the full scale of the participation of many people in socio-economic activities. Which in turn negatively affects the demographic dividend of the country.

Drug Abuse– Due to India’s close proximity to major opium-growing areas of the region, India is facing the serious menace of drug trafficking and as a spillover effect, drug abuse especially among the youth is a matter of concern. Being a signatory to all three UN conventions and the SAARC convention, India has enacted the Narcotics Drugs and Psychotropic Substances Act, 1985 and Prevention of Illicit Trafficking of Narcotics Drug and Psychotropic Substances Act, 1988 through which the country is addressing various aspects of drug problem.

Suicidal Tendencies– Though India’s suicide rate is the 12th highest in the world, the country is, unfortunately, home to the highest number of suicides among people in the 15-29 age group – 35.5 in 100,000 people. It is significant that the highest number of suicides is reported from states with a high literacy level. Maharashtra, Tamil Nadu, West Bengal, Kerala and Karnataka report more than 53 per cent of the national total.

Recent reports about a group of Indians joining ISIS have raised concerns about the possibility of an increasing number of young professionals joining global jihadist groups. The second area of concern is the recent trend in India’s domestic politics where radical groups and ideologies are being propagated, causing greater polarization among communities.

Political exclusion– Young people have been excluded from development programs and
activities in numerous ways. As an age cohort, youth are less likely to be involved in governance and decision-making processes, as a result of economic, political, and procedural barriers that prevent their participation. As the beneficiaries of services, youth are also likely to face marginalization due to their membership in excluded demographic groups, including women, indigenous, disabled, LGBTQI, refugee, ethnic minority, migrant, and economically impoverished. Often marginalized from local and national development gains, youth are particularly vulnerable to economic shocks, social instability, and conflicts.

The World Programme of Action for Youth (WPAY), adopted by the United Nations General Assembly in 1995, provides a policy framework and practical guidelines for national action and international support to improve the situation of young people worldwide.

How to capitalise on the demographic dividend

  • Strengthen the manufacturing sector so the Indian economy can generate adequate employment opportunities for its youth.
  • Skill development of the youth: there is a need for a comprehensive curriculum so that skill development becomes an essential part of our education system at every level as suggested in NEP 2020.
  • Create a robust health infrastructure because there is a direct link between health and economic productivity.
  • We must practice and promote tolerance so that people of various religions can live peacefully.
  • The state needs to follow the principle of secularism so that every community can feel safe and secure.
  • India needs huge investments in infrastructure like roads, public transport, Optical fibre network etc.

National Youth Policy

The vision of NYP-2014 is to empower youth to achieve their full potential, and through them enable India to find its rightful place in the community of nations. To achieve this vision, the Policy identifies five well-defined objectives and 11 priority areas and suggests policy interventions in each
priority area.

The priority areas are education, skill development and employment, entrepreneurship, health and healthy lifestyle, sports, promotion of social values, community engagement, participation in politics and governance, youth engagement, inclusion and social justice.

The focused approach on youth development and empowerment involving all stakeholders, as envisaged in NYP-2014, would result in the development of an educated and healthy young population, who are not only economically productive but are also socially responsible citizens contributing to the task of nation-building. It will cover the entire country catering to the needs of all youth in the age group of 15-29 years, which constitutes 27.5 per cent of the population according to Census-2011, that is about 33 crore
persons. It will replace NYP-2003, to take care of developments since 2003 and
future policy imperatives.

The NYP-2014 proposes broad policy interventions for the youth consistent with the 12thPlan priorities and does not propose any specific programme/ scheme, having financial implications.

All concerned Ministries/ Department would be requested to bring focus on youth issues within the framework of their plans/ programmes/ schemes etc.

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