The Demographic Dividend – India

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To start with this profound topic, a short introduction and definition will be necessary. The Demographic Dividend has been discussed throughout the media for years by now. And whatever opinion one might have, (will India waste or use this chance?), one will find proof for it.

But what is the demographic dividend?

The official definition for this socio-political occurrence is the rise in the rate of economic growth due to a rising share of working age people in population. India now has one of the world’s youngest population which in total counts 63.4% in the age group of 15-64 years, with a median age of 29. The comparison with the German demographics in which the median age is approximately 45 years, emphasizes the dimension of this economical advantage in India.

There are two important influencing factors on the demographic dividend which needs to be balanced to tease out economical development: fertility rate and the dependency ratio. The current fertility rate in India is 2.7 children per women and the dependency ratio lies by 0.5. The dependency ratio calculates all people who are economically dependent on the working age group, such as people below the age of 14 and older than 65. That means, if the fertility rate goes down and less babies are born, than less people are dependent on taxes, yet there is a huge part of the population paying taxes, therefore this money can be efficiently used for economical development.

But as the famous quote says: “This is easier said than done.” The problem that can be seen in India is, that there are the three deep-rooted aspects education, unemployment and the health care system, which were neglected from the political agenda for decades and which now turn out to be the most decelerating factors for a successful policy implementation regarding the demographic dividend.

1. Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.

– United Declaration of Human Rights, Article 26

Education in India is a topic which can fill a book of 10.000 pages, but to keep it short here, the main issue is that nowadays the Indian schools denote an increasing primary school enrollment (almost 98%), yet only 50-60% register for secondary education. Why is that? Approximately 70% of the Indian population lives in rural areas and due to lack of subsidies the economical situation is rather severe in most of these areas. Therefore a lot of male children drop out of school for labor purposes, women mainly leave school because of societal norms, such as an early marriage or household duties. This leads in the high rate of illiteracy in India. Officially there are 74% literate, yet the ability to calculate, read and write is exceedingly low. Until the current date the Indian government didn’t manage to curtail this situation.

As mentioned before, unemployment is one of the main reasons why children cannot enjoy sufficient education. This applies for rural as well as urban families. In India there is still 12% of child labor, which is only the official number. Most of the kids work in family businesses or on the black market.

The third factor that challenges the demographic dividend is the health care system. The Indian government only spends 1% of GDP on health issues, which is compared to the size of population and the  state of mal-nourishment only a breadcrumb. Another problem is the lack of access to medical facilities in rural areas, as long as people are sick and don’t have enough to eat, they will not be able to contribute to the economy.

But what are the advantages of the demographic dividend?
India is in a unique position regarding the labor market. By 2020 the majority of the Indian youth will enter the work force, estimations say that every 3rd white-collar worker in the U.S. will be Indian. Additionally the demographic dividend currently happening in China, will , because of the effects of the one-child-policy, most probably end at about the same time. Economically, the more people are working the more households will be able to save money and spend money. These market activities will boost the Indian economy and will attract more investment.

The question is, can the Indian government implement policies to turn the huge challenges around? The time is running…

Hourglass time clock with sand

Please check out The Harvard Project for Asian and International Relations


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