A good start can be with some fact highlighting the importance of Demographic dividend in India.
The body of the answer address the following dimensions:
Quote some facts about Indian population increase from the latest report about population
What is the nature and potential of DD in India, Pattern in India
Merits of the DD – savings, increased labour supply, human capital, economic growth etc. one should explain these with examples.
What are the main concerns?
What needs to be done to overcome these challenges and concerns and reap the benefits of the DD?
Conclude – unraveling the potential of youth must be substantiated sufficiently with the experience of the aged and old, so that they do not become a liability but assets in nation building.
Demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to growth of the economy. In other words, the ratio of the working age population is high and the dependency ratio in terms of proportion of children and elderly people low.
What is the issue?
By 2020, it is estimated that the average age in India will be just 29.
The dependency ratio will be as low as 0.4.
While this demography provides an opportunity, there are multiple challenges that need to be addressed.
Nature and potential of DD in India:
The study on demographic dividend in India by United Nations Population Fund (UNFPA) throws up two interesting facts.
The window of demographic dividend opportunity in India is available for five decades from 2005-06 to 2055-56, longer than any other country in the world.
This demographic dividend window is available at different times in different states because of differential behaviour of the population parameters.
Many countries must consider utilising it fully. Indeed, adult longevity continues to increase slowly after a country has completed demographic transition. Although some demographers insist that there are binding biological limits to such longevity, remarkable medical developments continue to contribute to increasingly longer lives. The second demographic dividend will continue in most Asian countries even after the first demographic dividend has ended.
Challenges in India:
Poor human capital: Formation reflected in low employability among India’s graduates and postgraduates. According to ASSOCHAM, only 7 % of MBA graduates have employable skills in India, and only around 20-30 % of engineers find a job suited to their skills. Technological change is making labour partially or wholly redundant in a number of sectors, across the world.
Low human development reflected in the human development report of UNDP. According to the Human Development Index of 2016, India stood at 131 out of 188 countries. Life expectancy at birth in India (68 years) is much lower than other developing countries (Sri Lanka – 75 years, China – 76 years). The mean years of schooling and the expected years of schooling are still low at 6.3 years and 11.7 years respectively.
Jobless growth: India’s high growth rate phase (2004-05 to 2010-11) has created significantly fewer jobs as compared to previous decades of economic growth. Around 47 % of India’s population is still dependent on agriculture which is notorious for underemployment and disguised unemployment. Majority of the workforce is employed by the unorganized sector where workers are underpaid and lack any kind of social security.
Falling female labour force participation: According to data from International Labour Organization and World Bank, India’s female labour force participation rates have fallen from 34.8 % in 1990 to 27 % in 2013. This has further declined to 23.7 % in 2016, as per the data from the Labour Ministry. Socio-cultural factors and rising family incomes have been identified as the main reasons for this decline. Another appalling concern is that a significant proportion of qualified women drop out of the workforce for reasons ranging from no suitable jobs in the locality—particularly in rural areas—to family responsibilities and marriage.
Poor Socio-Economic factors: The quality of primary schooling and teachers in India is very poor. ASER reports show the quality of education among children. Moreover, because modern ailments such as obesity are increasing in many developed countries, there is no guarantee that adult longevity will continue to increase perpetually.
What are some positive trends?
Despite the overall low job creation, allocation of labour is improving in areas where it is difficult to measure it, i.e the informal sector.
The informal sector combines services of old and new types.
Sometimes the old type gets converted into new internet based businesses.
Business is also migrating to where labour is rural.
Rapid growth in rural non-agricultural employment is a promising prospect for enhancing incomes.
Notably, 70% of India’s workforce is rural based.
But agriculture labour now accounts for only around 64% of rural employment.
Unfortunately, as skill shortage is a big hindrance and skill sets needs to be enhanced by training programs.
India is also urbanising rapidly and the rapid growth in “census towns” again suggests a rapid pace of non-rural employment growth.
Steps to increase productive employment is essential for social cohesion, sustainable growth, and to constructively harness the country’s youthfulness.
In order to increase the benefits of the second demographic dividend, it is important to exploit the wealth accumulated by the older generation.
Much of the SDD to be realized depends on building sound institutions and carrying out crucial financial, social security and labour market reforms.
India needs to increase its spending on health and education. As recommended by the National Health Policy 2017 and the National Policy on Education 1986, India needs to increase its spending on health and education to at least 2.5 % in 6 % of GDP respectively from its current levels. Enhancing policies to maintain and even increase health and longevity will therefore be necessary. It is also crucial to educate the older generation in saving money effectively.
India has to invest more in human capital formation at all levels, from primary education to higher education, cutting-edge research and development as well as on vocational training to increase the skill sets of its growing working-age population.
Increasing the number of formal jobs in labour intensive, export-oriented sectors such as textiles, leather and footwear, gems and jewellery These sectors also have a higher share of the female workforce.
The flagship schemes such as Skill India, Make in India, and Digital India have to be implemented to achieve convergence between skill training and employment generation.
A multi-pronged approach is imperative to reap the second demographic dividend. There is also a need to engage with the youth and create an enabling environment for entrepreneurship. The demographic dividend offers them a unique opportunity to boost living standards, but they must act now to manage their older populations in the near future by implementing policies that ensure a safe and efficient transition from the FDD to the SDD.