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Demographic Dividend: Boon OR Bane for India

Aparna Shukla
Associate Professor
Dr. VSIPS, Kanpur
Dr. A.K. Tomar
HOD, D.S. College, Aligrah

Abstract
Demographic dividend is an opportunity for India if it grasps it accordingly. There was a
major role of DD in economic growth of China. Now a day India is very much aware about
this opportunity but there is a need of proper planning and strategy formulation. This paper
is an attempt to find and analyse the correlation between economical and social factors with
successful DD through various equations. This paper also compares Chinese and Indian DD
competencies.
Key Words: Demographic Dividend (DD), Per Capita Income, Working Age Population ,
workers Participation Rate, skill Labour.
It is true that dramatic declines in fertility throughout much of the worldbut especially in
East Asiahave produced an initial demographic dividend. Many countries with falling
fertility have been able to devote more human and financial capital to the market economy
rather than to child rearing, thereby enjoying high levels of economic growth.
Indian DD:
In the near future India will be the largest individual contributor to the global demographic
transition. A 2011 IMF Working Paper found that substantial portion of the growth
experienced by India since the 1980s is attributable to the countrys age structure and
changing demographics. The U.S. Census Bureau predicts that India will surpass China as the
worlds largest country by 2025, with a large proportion of those in the working age category.
Over the next two decades the continuing demographic dividend in India could add about two
percentage points per annum to Indias per capita GDP growth.
No country is better poised to take advantage of the demographic dividend than India In
2020, the average age in India will be only 29 years, compared with 37 in China and the
United States, 45 in western Europe, and 48 in Japan. Moreover, 70 percent of Indians will be
of working age in 2025, up from 61 percent now. Also by 2025, the proportion of children

younger than 15 will fall to 23 percent of Indias total population, from 34 percent today,
while the share of people older than 65 will remain around just 5 percent.
Demographic Dividend of India & China
Contribution

of

DD

in

chinas

growth: Research conducted by Wang


and an economist indicates that at least
15% of the economic growth in China
between 1982 and 2000 was a result of
demographic dividend. After 2000,
China's demographic dividend has
declined and is reaching its end,
accounting for only 20% of its previous
contribution

to

China's

economic

growth before 2000.

Like

many

developing

countries at present, India will


have a relatively large workingage population (aged between
15 and 59 years), as compared
to its dependent population
(aged 0-14 and 60+) over the
next few decades. This youth
bulge will reach its peak in the
year 2035. Analysts consider
this period of a youth bulge to
be a boom, during which the
abundance of human capital can
be used to fuel the growth of
the country.

Is India ready to grasp the opportunity of DD ???????????????????????????????


The following economical and social factors are analysed to know the Indian competency for
successful DD, they are as,
Growth of the working-age to non-working-age ratio in India, 1950-2050

In India ratio of
working age to non
working

age

increasing

is
in

comparison to other
Asian

countries.

This will help India


to emerge

as

an

upcoming economic
giant in this region.
Improvements in Literacy Rate

Overall literacy rate has


gone up from just over half
to

almost

three

quarters

during 1991-2011. Literacy


level among females has
nearly doubled. Among the
youth the rates are much
higher.

Employment Status in India

Agricultural Employment Growth Rates

Non-Agricultural Employment Growth Rates

1993-94 to
20041993-94 to
05(%)
2004-05
(%)
Agriculture
Self 1.01
Non- agricultural self employment
3.86
employment
Nonagricultural
wage
employment
3.18
Agriculture
wage -0.89
Rural Non- agricultural employment 3.52
employment
Urban
Nonagricultural 3.46
Total
Agriculture 0.40
employment
employment
Secondary sector employment
3.70
Agricultural GDP
2.37
Tertiary sector employment
3.35
Implied
employment .17
Total Non- agricultural employment
3.49
elasticity
Non- agricultural GDP
7.71
Real Agricultural Wage 2.15
Implied employment elasticity
.45
rate(
CPIAL
deflated)
Average
Real
Non- agricultural Wage 2.77
rate

Unemployment Rate in India by Age Group

Source: Using NSS Employment and Unemployment Survey unit record data

The unemployment rate by year interval age groups shows that it is the highest among the
younger cohorts especially 15 to 24 years age cohorts. In other words, the incidence or
instances of those who are willing to work and available for the labour market but unable to
find the work or employment is higher among the young (below 30 years) when compared
to their seniors (30 + age). It is highest among the 20 to 25 years age cohorts. The situation
of young jobseekers in comparison to adults seems to be hard.

Projected Sector wise Employment Status in India

From the above given table and


chart it is clear that there is a
increase in employment rate in

Work Participation Rate


Group

agriculture sector . Dependency on


this sector is high but contribution
to GDP is low. It is clear from the
given figure that employment in

WPR is approx 57% in India in last

agriculture sector should decline

decade while in China it was

and more participation should in

approx 70%. In India female WPR

other sectors.

is very low approx 33%. And for

male 77.7% .From the given chart


it is clear that in last decades WPR
in age group (10-24) increased but
afterwards
improvement.

there

is

no

(WPR) in India by Age

Indian Skilled work force Numbers

This is one side


of coin but on
the other side
India

has

higher
education gross
enrolment ratio
of only 12.4%.
The

remaining

87.6% drop out


at

various

points

in

school.

Only

2.5 million out


of

total

seven

of

million

that reach class


XII go on to a
university.
Currently
about

only
2%

of

the Indian
workforce has
formal training as
against an average
of 75% in Europe.

SWOT Analysis of Indian Demographic Dividend


SRRENGTH

WEAKNESS

Increased working age population.


Improvement in overall literacy rate.
Increasing access of people presently in the working age to vocational
education and skills training facilities could prove to be an enormous
benefit.
The corresponding population ratio in India has grown more slowly, which
fits well with the slower increase in Indias rate of economic growth.
Extensive growth in service sector.

OPPORTUNITY

Indias youth bulge could just as easily turn


into a youth bomb.
Indias working age population will continue
to be over 70% of the total population till the
2025, there is enough time to exploit it fully

Most of Indias
working
age
population
is
employed in the
informal sector.
Lesser female
workers
participation
Lesser
infrastructural
growth.
slightly higher
rates
of
coverage
by
public pensions
Less
workers
savings
and
investment
which
creates
burden on the
government.
Indias
manufacturing
sector remains
weak
Disparities
in
human
development
across different
regions of India.
Inadequately
educated labor
in the northern
parts of the
country.

THREAT

Other developing countries like Indonesia,


Bangladesh, Pakistan is also going to grasp
the opportunity of DD.

for the benefit of the country.


Generates new jobs opportunities.
This area will generate more opportunities for
PPP.

Analysis of the impact of DD


Here it is tried to find out the correlation between DD and increased per capita income or
increased economic growth with the help of following equation:
y
Y
=
N WA .

Where

WA
N

Y
N

is per capita income,

population and

Y
WA

Y
WA

is working age

is per capita income to working age

population.
Above given equation shows the dependency of per capita income on number of working age
population and also on per capita income to number of working people.
All the above things in favour of India as it is shown in given chart

Growth in Indian per capita Income

The per

capita

income

of

Indians for

the

first time crossed


the

Rs

50,000-

mark in 2010-11,
although

using

current prices as
the

barometer.

According to the
revised GDP data
for

the

last

financial year, per


capita income is
estimated to have
risen 16.9% to Rs
53,331 compared
to Rs 46,117 in
the previous year.

Barro & Sala i Martin (1995), gave an equation for Growth rate of per capita income
which depends upon

.
Y

.
Z

.
W

here it is to tried to analyse the relevancy of this equation in Indian context.


equals the growth rate of income per member of the working-age population,

.
Z

.
W

is the growth rate of the working-age share of the population.


Keeping the per capita income to working population constant it is clear from the above
equation per capita income of a country is totally depends on the no. of working hands. The
variability of this equation highly proved in Indian case , as shown in above given chart.
Following Barro and Sala-i-Martin (1995), one may express the growth rate of income per
member of the working-age population, z , as
.
= ( Z*- Z0)
Z

where

z* is the steady-state level of income per worker and z0 is the initial level of income

per worker. is the speed of convergence to the steady state, which may depend on factors
such as life expectancy, educational attainment, and the capital stock.
According

to

the

Population

Reference Bureau's 2007World


Data Sheets, life expectancy at
birth for Indians is between 60
and 64years. This was also
confirmed by the most recent
Census of India in 2001. From
the given chart it is clear that
there is admirable improvement
in Indian life expectancy since
1960 to 2007.

According to previous research


the economic growth depends
upon availability of quality
working population which is
ample in India.
The above given equation is again very much proved in Indian context because life
expectancy and literacy rate is increasing in India is increasing which is resulting in improved
numbers of skilled work force and ultimately more economical growth for a country.

Conclusion: The above analysis showes that there is positive relationship between
favourable economical and social factors and successful DD and also the positive correlation
between the life expectancy and per capita income to working population. The lesson here is
that nations wishing to enjoy robust economic growth and viable welfare states over the longterm must maintain fertility rates high enough to avoid shrinking workforces and rapidly
aging populations. A recent Rand report noted, for instance, that India will have more
favourable demographics than China in the long-term, insofar as its workforce is predicted
to grow, not shrink, over the next few decades (see below).1 Indeed, the report suggests that
in this century, India may be able to turn this demographic advantage into higher economic
growth rates than even China has enjoyed but the thing is to mould it positively
References:

David Bloom argues, for instance, that more than 25 percent of the per capita GDP
growth associated with the East Asian economic miracle of the late twentieth
century can be attributed to the fact that the total fertility rate in East Asia fell from

about six children per woman in 1950 to less than two today.
As Phillip Longman and his colleagues point out in The Empty Cradle, on current
course, countries like China and Japan are poised to see their workforces shrink by
more than 20 percent between now and 2050 because of persistently low fertility,

even as their elderly populations surge.


Bosworth and Collins (2008) use a simple growth accounting framework to compare
the recent economic performance of China and India, and produce estimates of the
contribution of labor, capital, education, and total factor productivity (TFP) for

individual sectors and the economy as a whole.


Nicholas Eberstadt (2010) considers the implications of demographic change in Asia
for the evolving cross-country strategic balance, noting that economic strength has a
major effect on military strength. He finds that Chinas forthcoming demographic
changes are likely to pose a barrier to its continued rise, whereas he sees a moderate

boost to Indias strength because of its demographic picture.


Bloom et al. (2010) study economic growth in China and India between 1965-70 and
1995-2000 and find that increases in the working age population share during that
period boosted the rate of economic growth in India by an annual average of 0.7

percentage points.
Yong Wang and Kamhon Kan.Examining projected changes in the size of the labor
force in China and India provides a straightforward way of considering the interaction

of population growth, changing age structure, and the supply of labor.


David E. Bloom Harvard School of Public HealthJanuary 2011, Population Dynamics

in India andImplications for Economic Growth


Web References :
http://sustaindemographicdividend.org/articles/the-sustainable-demographic
http://business.mapsofindia.com/india-economy/india-vs-china.html
http://www.policyproject.com/pubs/generalreport/Demo_Div.pdf
http://www.strategy-business.com/article/10205?gko=93faf
http://planningcommission.nic.in/data/datatable/0904/tab_57.pdf