Demographic Dividend – Opportunity and Challenges

Demographic Dividend

Background : 2011 census shows that India’s working age population (15-64 years) is now 63.4% of the total, as against just short of 60% in 2001. The numbers also show that the ‘dependency ratio’ has shrunk further to 0.55.

Also, India is poised to become the world’s youngest country by 2020, with an average age of 29 years. India will account for 28% of the world’s workforce, according to an EY-FICCI report. As per IMF, the democratic dividend could add 2 percentage points to per capita GDP growth per annum.

Challenges: There are different challenges which India has to deal with:

  1. Skill Deficit and Education: Of the five million graduates that India produces annually, only 34% are readily employable, since most lack necessary skills required for any role in any industry. According to another study, 47% of graduates are not employable in any sector. Poor knowledge of English and inadequate computing skills are compounded by the absence of even basic domain knowledge for roles and industry that job-seekers hope to join. This has also given rise to unemployment with one-third of our unemployed being graduates and above. Only 5% of the population in the age group of 19-24 has some form of vocational education

India faces many challenges in its primary and secondary education sector. According to Harvard economist, an average Class 8 student in India would be learning what students learn in Class 1 or 2 in the United States. Out of every 100 children, 19 continue to be out of school. Of every 100 children who enrol, 70 drop out by the time they reach the secondary level. Research suggests that 80% of brain development takes place by the time a child turns five. And yet the Right to Free and Compulsory Education Act (RTE) applies only to children from six to 14 years.

  1. Social challenges: Taking advantage of the demographic dividend requires a healthy nation and a balanced population. There have been slow improvements in social indicators but we are still far behind developed countries and even from neighbours such as Nepal and Bangladesh.

Gender ratio has only improved by 0.75% from 2001 to 2011 with gender ratio at birth also improving by 2 points to 908 females per 1,000 males in 2010-2012 from 906 in 2009-2011.

MMR has only improved from 212 deaths per 100,000 live births in 2007-09 to 178 in 2010-12, far behind the target of 103 deaths per live births set by UN Millennium Development Goals.

Infant mortality has declined marginally to 42 deaths per 1,000 live births in 2012 from 44 deaths in 2011.Still, one in every 24 infants die within one year of life. India is also home to the highest number of child labourers in the world. And it has the world’s largest number of sexually abused children – 53 percent -according to a recent study released by the government.The prevalence of HIV/AIDS poses another major challenge for India to capitalize on its demographic dividend.

The wide variations between different regions of India pose another set of problems for the government’s campaign to improve the social indicators with Northern states performing very badly as compared to the Southern states and rural areas performing much better than urban areas.

  1. Job creation: No net new jobs were created in India between 2004-05 and 2009-10, a dramatic slowdown on the previous five years, when 60m jobs were created.

High inflation has prompted households to store ever more of their savings in physical assets rather than the financial system.

Although India has cheaper labour than China but countries such as Bangladesh, Vietnam, Indonesia and Cambodia are likely to get more work as costs rise in China than India in labour-intensive industries like textiles and clothing.

Major Indian players are more interested in expanding globally than building factories in India.

Tricky labour relations are a problem. But the bigger problem is the neglect of the manufacturing sector which currently accounts for only 16% of GDP — compared to China, Korea and Indonesia, where the share is 40%-50% of GDP. There is also concern regarding a dearth of skilled talent which accounts for the bulk of employment in the manufacturing sector these days.

And there are lots of other deterrents, too, from red tape to erratic electricity, a lack of land, bad roads and busy ports.

Solution: The problem can be solved through following methods:

  1. Skill Development: Bridging the skills deficit is a huge challenge and a key to utilize the demographic dividend accordingly. The government has developed a National Policy on Skill Development (NPSD) with a target for skilling 500 million persons by the year 2022 out of which 350 million will be taken care of by Government Initiatives and 150 million by National Skills Development Corporation(NSDC), based on PPP model. The effective implementation of this policy is extremely important because the policy will :

  1. Provide financing on outcomes rather than inputs which used to be the trend before. It will also focus on candidates rather than institutions.
  2. Converge with other national employment programs like NREGS for imparting skills training in rural areas.
  3. Have social protection mechanisms made to eliminate child labour, to improve access for girls, people with disabilities and other vulnerable groups.
  4. Establish Village- or block-based skill development centres to serve the needs of local communities
  5. Coordinate action on skill development with state governments which will also establish skill development missions of their own.

However, skills training without proper guidance toward career prospects and options is sure to be only a short-term fix. India’s youth are largely from impoverished backgrounds and often demonstrate a near-sighted view of the future.

Altering the choices of India’s disadvantaged youth requires an expansion of their social networks. Mentorship should be started at an early age for students so that students can plan their career ahead well in advance as per their interests.

The sense of professional satisfaction will have ripple effects that will reach much beyond these communities – and last longer than the next professional boom.

  1. Education Reforms: There is a need to expand the right to education to include children below the age of six years. In many developing countries, it is offered to children at the age of three. To give this critical pre-primary intervention due focus, the government must mandate two years of pre-primary education within the current schooling system with a well-designed curriculum to provide a strong foundation for all children. It should also establish an early childhood education (ECE) accreditation agency for setting standards and quality assurance of pre-schools.

We need a nation-wide literacy and numeracy drive to ensure that all children master basic reading and numeracy skills by Class 2, a goal defined clearly in our Twelfth Plan. Replicating policies like the ‘national literacy hour’ in Britain that required teachers to devote at least one hour a day to improving children’s reading standards, through carefully structured daily lessons will go a long way in reaching that.

For effective implementation, all ECE and primary teachers must be trained on building early literacy and numeracy skills among first generation learners and provided with teaching-learning aids such as Math manipulatives and levelled reading materials in regional languages. We should also consider specialised summer remedial camps. To provide personalised attention to children, tutor volunteers should be made available round the year.

The educational curriculum should also be updated on a yearly basis to compensate for the continuous changes especially in the technological space which will be possible only with adequate communication and collaboration between the government, academia and industry in India.

  1. Job creation: India needs to have favourable policies for both foreign and domestic investors. In the past, any country that has taken the benefit of demographic dividend has done it from manufacturing. However, arcane labour laws (51 central and 170 state) are the primary reason behind India’s manufacturing problem. Reform is the need of the hour as they make it hard for firms with more than a handful of staff to fire people and allow disputes to become legal endurance tests. Tighter rules also impede growth in labour-intensive industries and prompt firms to remain small.

About 92% of India’s 470 million workers are informal workers. Informal employment is insecure, poorly paid and has no social security. Doing away with the wage difference between regular and informal workers which will increase wages for informal workers is an important step to stop labour unrest.

Spurring indigenous production rather than importing ready-made goods in critical areas like defence by providing subsidies to local manufacturers is also an important step however it should be ensured that subsidies are temporary and production is competitive.

India also needs to improve its infrastructural arrangements and use more technological innovation to have a competitive edge.