Harnessing India’s Demographic Dividend 

Syllabus: GS1/Population; GS2/Social Issues; GS3/Economy

Context

• India’s youth is often hailed as the nation’s greatest asset, but this so-called ‘demographic dividend’ could become a liability without relevant skills and may spiral into crisis if systemic issues remain unaddressed.

Demographic Dividend

• It is the accelerated economic growth that can result from a rapid decline in a country’s fertility and the subsequent change in the population age structure.
• It occurs when a country’s working-age population (15–64 years) grows larger than its dependent population (children and elderly), creating a potential boost in productivity, savings, and economic growth.
  • India entered this phase around 2005, and it is expected to last until 2055.
• Countries like China, Japan, and South Korea leveraged their demographic windows to become global economic powerhouses.
• Currently, India has more than 835 million people under the age of 35.

Importance

• India is on the brink of transformation due to its demographic dividend, with over 65% of the population under 35 and a median age of 28.
  • This favourable age structure presents a major opportunity for economic growth, productivity, and positioning India as a global talent hub.
• India’s working-age population will continue growing until 2055, offering a long window for strategic development.
• India’s expanding middle class, digital adoption, startup ecosystem, and strengths in IT, pharmaceuticals, and engineering further enhance its global appeal.

Key drivers of India’s demographic dividend

• India’s demographic dividend is driven by a growing working-age population, expected to reach 1 billion by 2047, rapid urbanisation, digital employment through gig and remote work platforms, and rising entrepreneurship.
• Key enablers include: Urban growth through Smart Cities and infrastructure projects.
  • IT hubs like Bengaluru and Pune boosting global investment.
  • Female workforce participation is improving through policy reforms and support schemes.
  • Education and skill development programs like Skill India are equipping youth with job-ready and future-proof skills.

What are Concerns & Issues Linked With India’s Demography?

• Gap in Academic Training & Market Needs: Each year, millions of graduates enter the workforce, but 40-50% of engineering graduates remain unemployed.
  • Alarmingly, 61% of higher education leaders admit curricula are misaligned with industry demands.
• Outdated System in a Changing World: India’s education framework still emphasizes rote learning and outdated curricula while the future of work is being reshaped by AI.
  • Research suggests that up to 70% of current jobs globally will be impacted by AI, with 30% of tasks automated across many professions.
• Skills Mismatch Starts in High School: Most students remain unaware of emerging career opportunities.
  • Consequently, 65% of graduates pursue degrees misaligned with their interests or abilities, compounding employability challenges.
  • India Skills Report 2024 reveals that over 65% of students pursue degrees misaligned with their interests or market demand.
  • The Mindler Career Awareness Survey (2022) found that 93% of students know of only seven career options, mostly traditional ones like doctor, engineer, or lawyer.
    • In reality, today’s economy offers more than 20,000 career paths, but only 7% of students receive formal career guidance.
• Digital Tools, Analog Mindsets: While smartphones and digital access are widespread, teaching methods remain examination-focused.
  • According to the Graduate Skills Index 2025 (Mercer-Mettl), only 43% of Indian graduates are job-ready.
  • EdTech platforms have largely emphasized test prep over practical skills, while industry-ready learning remains peripheral.
• Missed Industrialization: India missed the industrialization wave, unlike China and Vietnam.
  • The IT and service sectors absorbed only a fraction of the labor force, and millions remain underemployed in informal sectors, especially in rural areas.
• Policy Loopholes: The government has launched several initiatives — from the Skill India Mission to PMKVY, PMKK, JSS, PMYY, SANKALP, and others. Despite billions invested, targets remain unmet due to fragmented approaches and lack of alignment with real-world demands.

What Need To Be Done?

• Upskilling, Cross-skilling, and Reskilling: By 2030, 70% of jobs in India could be at risk from automation (McKinsey), while the World Economic Forum (WEF) predicts 170 million new jobs will be created globally — but 92 million of them will simultaneously be displaced.
  • It underscores the urgent need for upskilling, cross-skilling, and reskilling at scale.
  • Skill India Mission focuses on upskilling and reskilling youth for emerging sectors like AI, robotics, and green energy.
• Education Reform: NEP 2020 aims to universalize access to education and integrate vocational training from early stages.
  • Career awareness needs to be improved — 93% of students are aware of only 7 career options, while the economy offers over 20,000.
• Gender-Inclusive Growth: Programs like STEP and the National Creche Scheme support working women and promote female participation in the workforce.
  • Women make up 42.6% of STEM graduates, but many drop out early — a missed opportunity for inclusive development.
• Digital Economy & Innovation: Digital India and platforms like UPI have revolutionized transactions and created new job ecosystems.
  • The digital economy is projected to reach $350 billion by 2030, offering vast employment potential.
• Industrial Strategy & Job Creation: India needs to create 8.5 to 9 million jobs annually until 2030 to absorb its growing workforce.
  • The Production Linked Incentive (PLI) scheme aims to boost manufacturing and reduce dependence on services alone.
  • A shift from informal to formal employment is essential for long-term stability.
• Global Integration & Investment: India is positioning itself as a China-plus-one destination for global supply chains.
  • With 1.04 billion working-age people by 2030, India offers unmatched human capital for global investors.

Conclusion

• India’s future as a digital powerhouse depends on how it addresses this skills crisis. The challenge is real, but so is the opportunity.
• India can transform its demographic dividend into a genuine advantage, by aligning education with industry, expanding career awareness, and embedding skill development at every stage of learning.
• To fully leverage the dividend, India must focus on job creation, inclusive growth, women’s empowerment, and continuous upskilling.

Source: TH