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DEMOGRAPHIC DIVIDEND IN

INDIA:PROBLEMS AND PROSPECTS

PROF. G. RAMACHANDRUDU

WHAT IS DEMOGRAPHIC
DIVIDEND?
The Demographic dividend is a rise
in the rate of economic growth due
to a rising share of working age
people in a population. This usually
occurs late in the demographic
transition when the fertility rate falls
and the youth dependency rate
declines.

SOME EARLIER EXPERIENCES

The demographic dividend played a role in the


economic miracles" of the East Asian Tigers and that
the economic boom in Ireland in the 1990s (the Celtic
tiger) was in part due to the legalization of
contraception in 1979 and subsequent decline in the
fertility rate.

The Chinese economy has achieved 30 years of


high growth since the launch of the reform and opendoor policy in the late 1970s. Since 2000 in
particular, China has established a position for itself
as the worlds factory through the rapid expansion of
its exports of manufactured goods. China has also
attracted attention as the worlds market in recent
years. Remittances from NRCs are phenomenal and
they pushed investments and hence growth rate.

CONDITIONALITY OF
DEMOGRAPHIC DIVIDEND
The magnitude of the demographic
dividend appears to be dependent
on the ability of the economy to
absorb and productively employ
the extra workers , rather than be a
pure demographic gift.

Four mechanisms for growth in


Demographic Dividend

1. The first is the increased labor supply. However, the magnitude


of this benefit appears to be dependent on the ability of the
economy to absorb and allow the skilled to migrate so that
remittances increase.
2. The second mechanism is the increase in savings. As the
number of dependents decreases individuals can save more. This
increase in national savings rates increases the stock of capital
in developing countries already facing shortages of capital and
leads to higher productivity as the accumulated capital is
invested.
3. The third mechanism is human capital. Decreases in fertility
rates result in healthier women and fewer economic pressures at
home. Work participation of women in productive occupations.
This also allows parents to invest more resources per child,
leading to better health and educational outcomes.
4. The fourth mechanism for growth is the increasing domestic
demand brought about by the increasing GDP per capita and the
decreasing dependency ratio.

POPULATION TRENDS

GLOBAL POPULATION GROWTH


IS DRIVEN BY DEVELOPING
COUNTRIES
8.7 B
World Population 1950-2050.

6.1 B

2.5 B

Source: United Nations, World Population Prospects: The 2004 Revision (2005).

Community Service Council of Greater Tulsa

POPULATION AND RESOURCES- A GLOBAL


OUTLOOK

Comparison of
developed and
developing
countries.

10 LARGEST COUNTRIES IN THE


WORLD
IN 2007 AND 2050 PROJECTIONS

Source: Population Reference Bureau. 2007 World Population Data Sheets (2007).

Community Service Council of Greater Tulsa

POPULATION GROWTH, CRUDE BIRTH AND


DEATH RATES &SEX RATIO: INDIA
Year

Populatio
n (In
Million)

Percenta
ge
Decadal
Variation

Average
annual
exponent
ial
Growth
Rate (Per
cent)

Crude
Birth
Rate

Crude
Death
Rate

Sex Ratio
(Females
per 1000
males)

1901

238.4

45.8

44.4

972

1911

252.1

5.75

(+) 0.56 49.2

42.6

964

1921

251.3

-0.31

(+)0.03

48.1

47.2

955

1931

279.0

11.00

(+) 1.04 46.4

36.3

950

1941

318.7

14.22

(+) 1.33 45.2

31.2

945

1951

361.1

13.31

(+) 1.25 39.9

27.4

946

1961

439.2

21.51

(+) 1.95 41.7

22.8

941

1971

548.2

24.80

(+) 2.20 41.2

19.0

930

1981

683.3

24.66

(+) 2.22 37.2

15.0

934

1991

846.4

23.87

(+) 2.14 32.5

11.4

927

2001

1028.6

21.54

(+) 1.93 24.8

8.9

933

Structure of Indias Population


by Age Groups (1961-2001)

Year

Age Group

0-14

15-60

60 and above

1961

41.0

53.3

5.7

1971

41.4

53.4

5.2

1981

39.7

54.1

6.2

1991

36.5

57.1

6.4

2001

35.6

58.1

6.3

2011

29.7

61.9

8.5

Percentage Distribution of Population by


Broad Age Groups of Major States (1961 and
S.
State
Age Group 2001) Age Group
Age Group
No.
years

1961
1

15-59

0-14

AndhraPrades

39.54

2001
32.07

1961

6o+

2001

1961

2001

54.23

60.32

6.23

7.61

Bihar

42.32

41.54

52.07

52.01

5.62

6.45

60.25

4.94

6.91

NA

7.52

Gujarat

42.89

32.84

52.17

Haryana

NA

35.99

NA

Karnataka

42.16

31.91

52.11

60.45

7.3

7.69

Kerala

42.64

26.08

51.53

63.44

5.84

10.48

Madhya
Pradesh

40.82

38.21

54.02

54.66

5.16

7.14

Maharashtra

40.67

32.14

54.07

59.12

5.27

8.74

Orissa

39.10

33.23

55.23

58.5

5.67

8.27

56.49

WHY POPULATION
CONTROL?
POPULATION THEORIES

THOMAS MALTHUS

(1766-1834)

Population growth will lead to


starvation, war, disease.
Death rates check population
unless birth rates are lowered.
P: 1 2
F: 1 2
.

4
3

8
4

16
5

F/P: 1 1 0.75 0.50 0.31

In our day, Paul Ehrlich


(The Population Bomb, 1968) is
called
neo-Malthusian.

Figure 1.3

WHAT DRIVES POPULATION GROWTH:


DEMOGRAPHIC TRANSITION

CARRYING CAPACITY OF THE EARTH


Prof. T.N. Srinivasan defined carrying capacity as the
Maximum population that can be sustained
indefinitely into the future.
The methodology of the estimation combines a
climate map with a soil map and then divides
the study area into grids of 100 km2 each the 15
most widely grown food crops were considered Three
alternative levels of farm technology were postulated.
Farm Technology Carrying

Capacity(billions)

Low

5.6

Intermediate

14.9

High

33.2

EFFECTS OF POPULATION
GROWTH
Effects of faster population growth

Younger
More

age structure

complex families

Higher

rates of migration

Higher

rates of conflict?

PROBLEMS AND PROSPECTS OF

DEMOGRAPHIC DIVIDEND
IN INDIA

Demographic Dividend in India


As fertility drops, ratio of workers to nonworkers rises.
Provides a window of opportunity provided
potential workers acquire skills and find
productive employment in India and abroad.
About a fourth of poverty reduction could be
attributed to demographic factors in India.
Right economic policies are critical, otherwise
the scenario could turn out to be demographic
liability.
Dividend for 2-3 decades only since proportion
of older population would eventually increase ,
thereby increasing dependency ratio again, as
in the case of China.

Correlation between GNP


Growth and working Age
Population Working age
Name of year

GNP Growth rate

population(%)

1950-1951

2.3

52.5

1960-1961

7.1

53.3

1970-1971

5.0

53.4

1980-1981

7.2

54.1

1990-1991

5.6

57.1

2000-2001

4.4

58.1

2010-2011

8.4

61.9

Correlation Coefficient=0.6741

Non-Resident Indians and Person


of Indian Origin (2011)(Total 30
million
persons)
S.No
COUNTRY
PERSONS
% of Total
1
2

Nepal

4,000,000

United States

2,843,391

3 Malaysia

2,400,000

Myanmar

2,000,000

5 Saudi Arabia
England
7
U AE
8
South Africa
9
Canada
10
Mauritius
11
Kuwait
12
Trinidad and Tobago
13
Oman
14
Australia
15
Singapore

1,500,000
1,414,100
1,400,000
1,160,000
1,000,000
855,000
580,000
525,000
450,000
405,000
400,000

13.33
9.48
8.00
6.67
5.00
4.71
4.67
3.87
3.33
2.85
1.93
1.75
1.50
1.35

NRI Remittances to India


YEAR

US$(Billion)

% growth

2008-09

46.9

----

2009-10

53.6

14

2010-11

55.6

2011-12

66.1

19

TOP INTERNATIONAL REMITTANCES


RECEIVING STATES IN INDIA (2007-08)
S.NO.

STATES

TOTAL

TOTAL

REMITTANCES

REMITTANCES

(Rs.Crores)

AS A % OF GSDP

KERALA

51211

35.3

MAHARASHTRA

26481

5.2

TAMIL NADU

17277

6.4

PUNJAB

16505

12.9

ANDHRA PRADESH

9512

3.3

DELHI

8392

6.4

GUJARAT

8305

3.2

KARNATAKA

7564

3.6

UTTAR PRADESH

6553

2.2

10

RAJASTAN

5689

3.7

11

GOA

3574

21.6

12

WEST BENGAL

3197

1.2

Demographic
Determinants of Growth
Rate of GNP
S. No.
Independent Variables
Beta Coefficient

1
Constant
-2.83 (4.94)
2
Dependency rate
-0.81 (1.72)
3
Life expectancy
-0.76 (1.15)
4
Adult literacy
5.23* (4.88)
5
Female work participation
1.62* (3.47)
6
% of working age population
3.35* (4.86)
7
Growth rate of population
-2.28* (3.96)
R-Square = 0.68, F value=16.52
t-values are provided in parenthesis.
* Significant at 1 per cent level.

INDIAs FUTURE

INDIAS PROBLEMS
Low women work participation
(poor HRD)
Black Money and acute
corruption
Rigid Education System
(Curriculum)
Lack of skilled training
Poor employability

INDIAS PROBLEMS(contd)

low overall productivity due to lack of


supportive nationwide infrastructure.

Large number of people become apprentices


in the unorganized sector to pick up saleable
skills.
Skills generated in the unorganized sector
have no formal recognition! (people with
manual work in India has higher happiness
index)
Labour market opportunities for even the most
skilled labour are restricted to local market.

INDIA'S ADVANTAGE
Demographic and geographic
Societal Building Block (family as an
institution)
English Language (largest number of English
speaking population)
Affinity to mathematics and science subjects
Credible IT image (India is world leader)
Steady Growth Trajectory
Strong will, enthusiasm and spirituality that
gives honesty & commitment to workforce.

WORKFORCE SHORTAGE IN
DEVELOPED COUNTRIES BY 2020
Maximum projected shortage
United States - 6.1 millions
Canda - 1.7 millions
Spain - 2 millions
Japan 2.8 millions
Over 50% shortage predicted in
English speaking countries.

MEDIAN AGE BY 2025

USA 39.3 years


Canada 42.9 years
Mexico 32.5 years
Europe 45.4 years
France 43.3 years
Italy 50.7 years
UK 44.5 years
Russia 43.8 years
Japan 50 years
China 39 years
India 31.3 years

FUTURE WORK FORCE


In 2025, out of every 100 workers in India 12.1
will be above 65 years as compared to 49 in
Japan.
In next 10 years, India will create 47 million
workforce to lead the world. 100 million at
present are in schools.
India is youngest in the world. Average age
today is 23 years, while that of Japan 41 years

REALITY CHECK
1210 million population with a 582 million
workforce. Unemployment at 9.2%.
By 2020 60 million unemployed, more
than entire population of UK, France & Italy.
90% of workforce in the unorganized
sector.
Low skill levels among women causing rise
in unemployment rate for women.

INDIAS LABOUR MARKET


Labour force participation is low 582 million of a
1.21 billion population
Organized employment has been stagnant at 40
million since last 30 years!
Unorganized employment is the bulk of labour
force
Given the employment elasticity of 0.15 and ICOR
(3.75), the 8 million new jobs needed to freeze
unemployment, requires GDP growth of 13% and
investment of $ 130 billion.

What is the India story?

India Story

1) Rising GDP growth


% average annual GDP growth

1900
1950
1980
2002
2006

1950
1980
2002
2006
2011

1.0
3.5
6.0
8.0
6.9

India Story

2) Population growth is
slowing down
% average annual growth

1901
1951
1981
1991
2001

1950
1980
1990
2000
2011

1.0
2.2
2.1
1.8
1.4

Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)

India Story

3. Literacy is rising
%
17

1951
1991
2001
2011

Source: Census of India (2011)

52
65
74

India Story

4. Middle class is
exploding %
Million
People

1980

2000

22

2011

33

65
220

Source: The Consuming Class, National Council of Applied Economic Research, 2002

438

5. Poverty is declining

India Story

1980

46%

2000
2010

26%
16%

1% of the people have been crossing poverty line


each year for 20 years. Equals ~ 200 million.

6. Productivity is rising

30% to 40% of GDP growth is


due to
rising productivity
India is bursting with macroeconomic potential, thanks to
powerful demographics, rising
GDP per capita, and a robust
services industry.

India Story

7. Per capita income


gains
(US$ ppp)
1980

1,178

2000

3,051
2011
2011

Source: World Bank

3,627
Rs. 53,331(at current prices)

India Story

8. India is now the 4th


largest economy
And it will cross Japan between
2013 and 2014 to become the 3 rd
largest

THE INDIA MODEL IS UNIQUE

DRIVERS OF GROWTH
India
Asia
Domestic

East and S.E.


Exports

DRIVERS OF GROWTH
India
Asia
Domestic
Services
Manufacturing

East and S.E.


Exports

DRIVERS OF GROWTH
India
Asia

East and S.E.

Domestic
Exports
Services
Manufacturing
Consumption
Investment

DRIVERS OF GROWTH
India

East and S.E. Asia

Domestic
Exports
Services
Manufacturing
Consumption
Investment
Low tech, labor
High tech,
capital
intensive industry
intensive
industry

IMPLICATIONS OF INDIA MODEL

Domestic led
Insulation from global
downturns
Less volatality

IMPLICATION OF INDIA MODEL

Services led
Have we skipped the
industrial revolution?
How do we take people
from farms to cities?

IMPLICATION OF INDIA
MODEL
Consumption led

People friendly: Consumption as % of GDP

India
Europe
China

Less inequality GINI INDEX

India
U.S
China
Brazil

64
58
42
33
41
45
59

The world needs another big consuming economy after the


U.S.

Reasons for
Success
Indias success is market led
whereas Chinas is state
induced. The entrepreneur
is at centre of the Indian
model

Rise of Globally Competitive


Indian Companies
Reliance, Jet Airways, Infosys, Wipro,
Ranbaxy, Bharat Forge, Tata Motors,
TCS, Bharati, ICICI and HDFC Banks

MOMENTUM

India has the potential to become the


skill capital of the world .
Labour force is skilling fast with vast and
rapid increase of education opportunities.
Lack of infrastructure investment, high
deficits, and government dysfunction all
have tainted Indias standing and its
performance.
Many things need to be done for Indias
rapid transition out of poverty and under
development specially in rural India.

INDIA NEEDS THOUGHT SHIFT


Education system should be given a global air,
from employment to employability (By rapidly
making the provision of industry oriented
practical skill education rather than current
focus on traditional academic degrees)
An attractive package must be prepared for
those NRIs who want to return to India and
Invest. Also Government must be pro-active in
facilitating skilled Indian workers who have
demand in other countries.

There is an urgent need for genuine focus and


clear strategies for providing social and
economic infrastructure in rural and semi-urban
areas through private - public participation.

THANK YOU
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