India’s Demographic Transition

Syllabus: GS1/Population and GS3/Economy

Context

• A report by McKinsey & Company highlights that India is on the verge of a significant demographic shift. By the 2050s, India is projected to have a support ratio comparable to advanced economies, indicating rapid ageing of its population.

Major Highlights

• Impact on Economic Growth: India’s demographic dividend contributed 0.7 percentage points annually to GDP per capita growth from 1997 to 2023.
  • By 2050, this contribution is expected to decline to just 0.2 percentage points per year, reflecting the diminishing advantage of a young population.
• Rising Dependency Ratio: In 1997, India had 14 working-age people (15-64 years) for every senior aged 65 or older.
  • By 2050, this will drop to 4.6 workers per senior, and by 2100, to 1.9 workers per senior, similar to Japan today.
• Female Labor Force Participation: Female labor force participation in the 20-49 age group is just 29% in India, compared to 50-70% in other emerging economies and 74% in high-income countries.
  • Increasing female workforce participation is a key recommendation to mitigate economic consequences.
• Fertility Rate and Population Trends: India’s fertility rate is 1.98 children per woman, below the replacement rate of 2.1.
  • According to UN projections, India’s population will peak at 1.7 billion in 2061 before declining.
  • By the end of the century, India will have more than twice the population of China.
• Recommendation: One way India can delay the negative economic consequences of demographic shift is by increasing female labor force participation.

Data on India’s Ageing Population

• As per the India Ageing Report 2023, the share of population over the age of 60 years is projected to increase from 10.5% in 2022 to 20.8% in 2050.
  • By the end of the century, the elderly will constitute over 36% of the total population of the country.
• 80+Years Population: The population of people aged 80+ years will grow at a rate of around 279% between 2022 and 2050, with a predominance of widowed and highly dependent very old women.

India’s Demographic Dividend

• Demographic Dividend: It refers to the economic growth potential that results from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64 years old) is larger than the non-working-age population (14 or younger and 65 or older).
  • The change in age structure is typically brought on by a decline in fertility and mortality rates.
• India’s Demographic Dividend: India, with its large and young population, is currently experiencing a demographic dividend.
  • India is expected to add another 183 million people to the working-age group between 2020 and 2050.
  • The dividend would peak around 2041 (when the working age population would be 59 per cent of India’s population) and is expected to last until 2055.

Challenges India Face

• Unemployment: For the demographic dividend to work, the country must provide productive employment to the 7-8 million youths that join the labourforce every year.
  • Youth unemployment was 5.7% in 2000 and jumped to 17.5% in 2019, showing an increase of more than 300 per cent. 
  • In 2022, the unemployment rate among graduates was around 29%, while for those who cannot read and write, it was just 3.4%.
• Education and Skill Gap: Over two-fifths of the country’s youths are educated below the secondary level and just 4% have access to vocational training.
• Gender Inequality: Women’s participation in the workforce remains relatively low, limiting the overall potential of the economy.

Measures

• Skill Development: Programs like the Skill India Mission aim to provide training and certification to millions of youth, enhancing their employability in various sectors.
• Education Reforms: Efforts to improve primary and secondary education quality, by introducing new Education Policy 2020.
• Make in India & Atmanirbhar Bharat: These initiatives focus on boosting domestic manufacturing, creating jobs, and enhancing industrial capacity to absorb the growing workforce.
• Start-up Ecosystem: The Startup India campaign encourages entrepreneurship, providing support to young innovators and creating new employment opportunities.
• Digital Infrastructure: Expanding internet access and digital literacy through programs like Digital India to create opportunities for youth in the technology and digital sectors.
• Healthcare Improvements: Programs like Ayushman Bharat aim to improve healthcare access and outcomes.

Way Ahead

• Developed countries have long crossed this zone that ensured their economic growth.
  • Currently, they are in the “population ageing” phase and increasingly depend on migrants. 
• The developing and poor countries, including India, account for more than 90% of the world’s young population. 
• But if they cannot generate employment, it is not just a loss of this dividend but also a larger issue of economic stagnancy. 
• Besides, such a large population of young people without productive vocations or engagements will trigger social unrest.

Source: ET