Reduced fertility and mortality rate leading to a rapid increase in working-age population poses several challenges. Discuss while suggesting a way forward. (15 Marks)

Mentors Comments:

  • Reaping the demographic dividend remains one of the foremost objectives of the Indian state. The change in population structure will raise several issues particularly those related to employment, social security etc. Hence this issue needs to be discussed in detail.
  • The question expects us to answer the following points
    • What kind of an impact falling mortality and fertility rate will have on working-age population
    • What are the direct and indirect challenges as a result of the change in the working-age population
    • Measures to deal with the issue
  • Bring out the several challenges of the changing age profile of the working population. Also mention if there are any advantages. Thereafter, provide a way forward
  • In the introduction, highlight the importance of demographic dividend and the need to seize the same
  • In the main body, highlight the impact of falling fertility and mortality rate on the age profile of the working population.
  • Bring out the change in age profile
  • Bring out other important changes having an effect on working-age population
  • Highlight challenges
  • Elder people would increase in the workforce – bring out issues like skill acquisition and up-gradation; technical know-how etc
  • Like an increased proportion of female in LFPR due to reduced burden of childcare Etc
  • Highlight advantages (potential or accrued)
  • Thereafter provide a way forward on how to deal with this issue before it becomes a problem of epic proportion
  • Highlight that it present India with a golden opportunity and India should seize the day

Answer:

Demographic Dividend refers to the rise in the rate of economic growth due to a rising share of working-age people in a population. India’s demographic dividend- i.e. its working-age (15-59 years) population, as of now, largely consists of youth (15-34 years), and as a result, its economy has the potential to grow more quickly than that of many other countries including neighbouring China. According to economists, the working population in India is set to rise considerably over the next decade or more. By 2020, the average Indian will be only 29 years of age, compared with 37 in China.

Impact of reduced fertility and mortality rate on working-age population:

  • The decrease in fertility and the associated decrease in the dependency ratio, in turn, lead to an increase in the share of the population concentrated in the working ages and hence in the ratio of the working-age to the non-working age population.
  • Dependency ratio:
    • The proportion of workers rises sharply, even as the proportion of dependents falls. In many countries, the ratio of workers to dependents goes up, giving a huge boost to per capita income.
    • India will see a significant rise in working-age adults India’s dependency ratio that is the number of dependents to working people is low at 0.6, compared with the developed countries. That ratio is going to decline further with fertility rates continuing to fall.
  • For the next few decades, India will have a youthful, dynamic and productive workforce than the rest of the world.
  • Declining fertility and age structure:
    • Declining fertility rates have changed the age structure of India’s population, resulting in a bulge in the working age-group. This “demographic dividend” has improved the dependency ratio leading to the hypothesis that the bulge in the working population will lead to an acceleration in growth.

Challenges:

  • A demographic trend where the proportion of persons aged 15-24 in the population increases significantly compared to other age groups which paired with limited employment opportunities may contribute to increased poverty, hunger, malnutrition, poorer health, lower educational outcomes, child labour, unsupervised and abandoned children, and rising rates of domestic violence.
  • Having a greater proportion of people in the working-age group can mean faster per capita economic growth, but only if their full potential is realized. State of employment in the country shows that India is still far from deriving any real advantage from its demographic dividend.
    • This is perhaps due to the poor employability of the workforce, which is severely affected by a deficit in educational attainment and health
  • Some dilemmas:
    • There are already difficulties in determining if women engaged in housework, particularly in rural India, are doing so under duress, being unable to find a job.
    • Another dilemma lies in deciding if youth, nominally enrolled in educational institutions but still looking for a job, are part of the labour force.
    • Problems also arise in deciding if workers who work in casual jobs for short durations are to be considered among the working or the unemployed.
  • Lack of skill:
    • The growth in the working-age ratio is likely to be concentrated in some of India’s poorest states and that the demographic dividend will be fully realized only if India is able to create gainful employment opportunities for this working-age population. 
    • Since most of the new jobs that will be created in the future will be highly skilled and lack of skill in Indian workforce is another serious challenge.
  • Low human capital base due to
      • Education constraints:-
        • There are serious problems with Indian higher education. These include a shortage of high-quality faculty, poor incentive structures, lack of good regulation
        • India is home to the world’s largest concentration of illiterate people in the world
      • Health:
        • At the primary level, there are also serious problems with health and nutrition that impact the effectiveness of education and the capacity for learning.
      • In the future, a large proportion of older working-aged people who face longer periods of retirement, accumulate assets to support themselves.

Advantages:

  • Higher savings:
    • The younger population will have both more savings and higher spending due to the rising higher disposable income. 
    • Higher savings along with better and more investment opportunities nowadays leads to higher household savings which increases the overall capital formation in the economy. This provides for future industrial investments and propels the economy into a higher growth path in the long run.
  • Higher-income increases the effective demand in the market thereby increasing the overall consumption and the market growth of business in the current period of time
  • Outsourcing of jobs:
    • With the declining working-age population in the other countries particularly developed countries, more jobs emanating from the developed countries will be outsourced and India can gain from it due to demographic dividend.
  • An increase in the share of a country’s working-age (15–64 years) can generate faster economic growth. The working-age population is generally more productive and saves more increasing domestic resources for
  • Increased fiscal space created by the demographic dividend to divert resources from spending on children to investing in physical and human infrastructure
  • Rise in women’s workforce that naturally accompanies a decline in fertility, and which can be a new source of growth
  • Additional boost to savings that occurs as the incentive to save for longer periods of retirement increases with greater longevity
  • Massive shift towards a middle-class society that is already in the making

Way forward:

  • Health and education parameters need to be improved substantially to make the Indian workforce efficient and skilled.  
  • Enhance, support and coordinate private sector initiatives for skill development through appropriate Public-Private Partnership (PPP) models; strive for significant operational and financial involvement from the private sector
  • Focus on underprivileged sections of society and backward regions of the country thereby enabling a move out of poverty; similarly, focus significantly on the unorganized or informal sector workforce.
  • Measures should have pan Indian presence and not just concentrated in metropolitan cities as most of the workforce is likely to come from the rural hinterland.
  • Investing in people through healthcare, quality education, jobs and skills helps build human capital, which is key to supporting economic growth, ending extreme poverty, and creating more inclusive societies

New technology could be exploited to accelerate the pace of building human capital, including massive open online courses and virtual classrooms. Policymakers should have a greater incentive to redouble their efforts to promote human capital so that it can contribute to economic growth and job creation

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