20-04-2012, 01:04 PM
India’s Demographic Dividend - Issues and Challenges
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Introduction
India is transforming demographically, in which the population of a nation slows down and life expectancy
increases, participation of women in labor force and rate of saving increases. India has its own issues like
illiteracy, income disparity, gap between haves and have-nots; etc. This study explores demographic dividend in
case of India by studying issues and challenges, the policies to be implemented and lessons to be learned from
countries like Japan, Ireland and Thailand. By 2025, India will have over 65% population under working class.
This is a unique window of opportunity for deploying resources.
This study explores the benefits to be realized and the policies to be implemented; now India is well poised for
becoming a super economic power. As all developed nations will have older population by 2026, as their
population is aging. It means if India can take the advantage of this situation, by proper deployment of
resources, by converting the human potential in to engine of economic growth. This period of demographic
dividend is an opportunity for overall growth; it’s not the guarantee for improving the standard of living. This
window of opportunity demands from youth, the right skills and aptitude for employability.
Developing nations like India goes through a transition phase, in which the economy shifts from agrarian to
industrial production and growth of services sector. Industrial countries have largely completed what is called
the "demographic transition"—the transition from a largely rural agrarian society with high fertility and
mortality rates to a predominantly urban industrial society with low fertility and mortality rates. At an early
stage of this transition, fertility rates fall, leading to fewer young mouths to feed. During this period, the labor
force temporarily grows more rapidly than the population dependent on it, freeing up resources for investment in
economic development and family welfare. Other things being equal, per capita income grows more rapidly this
is the first dividend followed by second dividend which is asset accumulation.
Demographic transition is the window of opportunity for implementation of development oriented Govt.
policies. This one-time gift of the demographic transition is expected to provide lots of opportunities for
development and economic gains. During the transition population growth and changes in the age structure of
the population are inevitable, if appropriate policies pursued.
Demographic Dividend
The debate over relationship between population growth and economic development is there since the much
criticized theory of Malthus in 18th century. Economist focused on the size of population and the growth of
nation, but the composition of population age structure was not considered until the study of Coale and Hoover
(1958), but in recent years, demographers Bloom et al have studied the type of composition of age structure of
population and its effect on economic growth and the concept of “demographic dividend” emerged.
Demographic dividend is defined as a rise in the rate of economic growth due to a rising share of working age
people in a population. This phenomenon occurs with a falling birth rate and the consequent shift in the age
structure of the population towards the adult working ages. It is also commonly known as the demographic gift
or bonus or demographic window. With many developing countries particularly in the Asian continent
experiencing a rapid decline in fertility, there has been overwhelming optimism that the demographic bonus will
take these countries to greater economic heights [Bloom and Williamson 1998; Cyrus Chu and Lee 2000;
Mason 1988].
As generally defined, demographic dividend occurs when a falling birth rate changes the age distribution, so
that fewer investments are needed to meet the needs of the youngest age groups and resources are released for
investments in economic development and family welfare (John Ross, 2004).
India is going through this transition phase, now a view has gained ground that what matters is not the size of
the population, but its age structure. However large the total population, is seen as an inevitable advantage
characterized as a “demographic dividend”. For India the size of working age population (age15 -60 yrs) will be
63.33 % in 2016 and population having age below 15 years will be 27.73% (National population policy
prediction). Given the availability of work and the resulting increased employment opportunities, the scenario
International Conference on Technology and Business Management
will be positive. As per study of C P Chandrasekhar et al, (EPW, Dec, 9, 2006) everything else remaining the
same, the higher the proportion of workers to non-workers, the larger would be the surplus.
By 2025, India would have begun to come out of the 'demographic bonus' phase where the growth rate of
working-age population exceeds that of total population. India is expected to go through this phase during 2020-
25. Increasing labour productivity, health, safety, saving potential and education standard are prerequisite, for
realizing the benefits of demographic dividend.
Demographic Dividend for India
The demographic dividend-this phenomenon occurs with a falling birth rate and the consequent shift in the age
structure of the population towards the adult working ages. It is also commonly known as the demographic gift
or bonus or demographic window. With many developing countries particularly in the Asian continent
experiencing a rapid decline in fertility, there has been widespread optimism that the demographic bonus will
take these countries to greater economic heights [Asian Development Bank 1997; Bloom and Williamson 1998;
Cyrus Chu and Lee 2000; Mason 1988].