India is growing with 7% GDP, Sensex crossing 10,000 and foreign reserves have crossed the $150 billion mark. Is this growth sustainable? Yes it is, provided we reap the benefits of what is known as the ‘Demographic dividend’.
Simply stated, the 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 investment in economic development and family welfare. The falling birth rates reduce the ratio of the dependent population to the working population.
The demographic dividend, however, does not last forever. There is a limited window of opportunity. When the window of opportunity closes, those that do not take advantage of the demographic dividend will face renewed pressures in a position that is weaker than ever.
India’s current scene
India is and will remain for some time as one of the youngest countries in the world. A third of India’s population was below 15 years of age in 2000 and close to 20 per cent were young people in the 15-24 age groups. In 2020, the average Indian will be only 29 years old, compared with 37 in China and the US, 45 in West Europe and 48 in Japan.
But India’s developments in ‘human capital’ are exiguous. The poverty ratio for India is still somewhere around the 50% mark. Only 7% of the population is employed in the formal sector. Farmer suicides are being reported every now and then. The social infrastructure vis-à-vis the physical infrastructure is disheartening.
The generations of children born during periods of high fertility finally leave the dependent years and can become workers.
Working-age adults tend to earn more and can save more money than the very young.
And for given unemployment rates, the higher the ratio of those in the labour force to those outside it, the larger would be the surplus. If this larger surplus is mobilised for investment, growth would accelerate.
However, Fareed Zakaria in his book ‘The Future of Freedom’ depicts this bulge to be bad for the economy. He goes on to state that ‘A bulge of restless men in any country is bad news.’
To sum up, it is evident that India is entering the phase of demographic dividend. In order to realise maximum benefit from this population bulge, it is necessary that programmes aimed at improving health care facilities and education are undertaken. Moreover, farmer suicides are not decreasing; the debts are growing and burdening those employed in the informal sector generally and in agricultural activities particularly. Microfinance can help alleviate the farmers’ distress by granting loans without collaterals.