India’s Demographic Dividend: Significance of population growth, challenges associated with demographic dividend, potential impact on the economy

According to the United Nations data, India has surpassed China to become world's most populous nation with 142.86 crore people.

According to the United Nations data, India has overtaken China in population recently. India’s population surpassed 1.4286 billion and it is slightly higher than China’s 1.425 billion. Though India’s birth rate has slowed down in recent years, the country has a larger working-age population in absolute numbers (1.1 billion) and proportion (75 percent of the population) than any other major economy.

On the other hand, China is ageing, with its population declining in 2022for the first time in more than 60 years. Its economic growth, which had skyrocketed at an average of nearly 10 percent a year since 1978, is now anaemic: The country’s gross domestic product (GDP) grew just 3 percent in 2022, and even by Beijing’s own estimates, is expected to increase by just5 percent this year.

Demographic dividend:

In  this  context  a  term  that  has  become  a  buzzword  is “Demographic dividend” which refers to the faith in India's huge youth population which is expected to hoist India up with its energy and exuberance. India with its huge population is a young country and is bestowed with a unique demographic opportunity.

Policymakers began viewing a growing young population in the form of the so-called demographic dividend — when a majority of a country’s population falls within the working ages (15-64 years) — as an engine for further economic development.

According  to  United  Nations  Population  Fund  report,  25 percent  of  India's  population  is  in  the  age  group  of  0-14 years, 18 per cent in the 10 to 19 age group, 26 per cent in  the  age  bracket  of  10  to  24  years,  68  per  cent  in  15 to  64  years  age  group,  and  7  per  cent  above  65  years. A demographic dividend is said to be occurring when the ratio of the working-age population is high and the dependency ratio in terms of the proportion of children and elderly people is low. This advantage can create the resources needed to increase investments in enhancing human capabilities, which, in turn, can have a positive influence on the growth and development of the society and the country.

There is need to harness this ‘demographic dividend’ for the nation’s economic growth and youth empowerment. According to a CII report from last year, India’s demographic dividend can boost India's GDP growth — from the current $3 trillion to $9 trillion by 2030 and $40 trillion by 2047. While India is likely to add 101 million people in the working age population between 2020-30, this number will reduce to 61 million and then to 21 million for 2030-40 and 2040-50, respectively. It is expected that India's working age population will start declining in the decade post 2050.

From  a  demographic  perspective,  a  youthful  age  structure ensures that the global population will continue to grow even if  average  fertility  drops  immediately  to  the  “replacement level”, at which each generation bears the exact number of children needed to replace itself. Indeed, fully two thirds of the anticipated increase in global population between 2020 and 2050 will be driven by the momentum of growth embedded in the relatively youthful age distribution of the world’s population in 2020.A large working-age population makes India attractive, not just from the labour market perspective but because the country could act as a large market for goods and services. The Demographic dividend has already helped India’s economic growth since the 1990s and country succeeded quite well in moving people from farms to factories. This was a cultural change  caused  by  policy  interventions  and  helped  by  the demographic changes.

Challenges associated with high population growth:

There is no denying the fact that high population growth rates impose pressure on finite resources, human, financial, and environmental. Evidence suggests that less than one-third of the anticipated increase in the use of natural resources until 2050 would be the result of population growth. Rapid population increase can exacerbate the challenge of ensuring that future development is sustainable and inclusive. Achieving  the  Sustainable  Development  Goals,  particularly those related to health, education and gender equality, can contribute to slowing global population growth.

Population growth magnifies the harmful impact of economic processes on the environment; yet the rise in per capita income has been more important than population growth in driving increased production and consumption. Rapid population growth makes it more difficult for low-income and  lower-middle-income  countries  to  afford  the  increase in public expenditures on a per capita basis that is needed to eradicate poverty, end hunger and malnutrition, and ensure universal access to health care, education and other essential services.

India has successfully slowed down the growth of the population significantly over the past decades without resorting to coercive practices. It has invested strategically to tap its demographic advantage and position itself as the provider of manpower for countries across the world, where aging and the non-availability of workers are posing serious challenges. Yet for that young workforce to earn and save well, India needs enough well-paying jobs designed to serve the modern economy. That’s increasingly proving a struggle for India. It is wrong to say that India’s youth bulge is a double-edged sword. To gain from it, India will need to create enough employment opportunities for the millions who enter its workforce every year — a challenge at which it is currently failing. For that, India needs to attract global investments. The window of opportunity is shrinking, and unless India moves quickly, its demographic dividend could easily turn into an unemployment nightmare.