India has now become the world’s most populous country, surpassing China with a population of 1.429 billion, according to the United Nations. This demographic shift brings to light a significant aspect of India’s population – its youthfulness. With a median age of 28.4 years, India boasts a large working-age population. By 2030, it’s projected that 69% of the total population, approximately 1.04 billion people, will fall into this category. This is India’s demographic dividend.
The demographic dividend refers to the potential economic growth that can occur when a country has a larger proportion of working-age individuals. This phenomenon has been instrumental in the economic growth of countries like Japan in the 1960s, Korea in the 1980s, and China in the 1990s. However, to fully reap the benefits of this demographic dividend, India must address two critical issues – education and employment.
India’s education system faces a significant challenge. Despite producing a large number of graduates, many lack the necessary skills for employment. A study by talent assessment firm Wheebox suggests that 50% of all graduates are unemployable. This issue is partly due to private colleges that do the bare minimum to maintain their operations. As a result, many young people end up with degrees that offer little value in the job market.
Furthermore, a Confederation of Indian Industry (CII) report reveals that only 3% of India’s workforce consists of formally skilled workers, compared to 24% in China. To improve the quality of the workforce, India needs to fulfill its promise of spending at least 6% of GDP on education, a target that has been stuck at just under 3% for a long time.
Unemployment is another significant issue. The International Labour Organization (ILO) reports a 15% unemployment rate among those with a bachelor’s degree or higher in India. This segment is expected to form India’s middle class and drive consumption. However, if they remain unemployed, it could hinder the growth of the consumption economy.
Additionally, the participation of women in the labor force has been declining, from 26% to 19% in the past decade. While women contribute to 40% of China’s GDP, they only contribute 17% in India.
Despite these challenges, India has made significant strides. It is now the fifth-largest economy in the world and has taken over the presidency of the G20. It has attracted foreign manufacturers and is focusing on infrastructure development to create jobs.
However, to fully capitalize on the demographic dividend, India needs to address these challenges. If not, it risks following the path of Japan in the 1990s or China today, where the fertility rate drops, the population ages, and the demographic advantage diminishes. The next 30 years will be crucial for India to prepare and make the most of its demographic dividend.
