When we talk about demography, it is an opportunity as well as a challenge. If India has to leverage the demographic dividend, Indians should not only be physically healthy but also be mentally healthy and skilled.
Even though India has become the most populous country in recorded history by overtaking China, it has to fix structural issues, including accelerating investment in health education and undertaking land-labour reforms to boost economic growth and create more jobs before the demographic dividend peters out.
China’s demographic dividend started in the 1970s and peaked around 1985-86 before petering out by 2012. Yet, China’s working-age population is almost the same as that of India now. On the other hand, India’s demographic dividend started to see some momentum from 1973 and peaked around 2011-12, but it still has a window till 2048.
Thus, the benefit to the GDP from the demographic transition in India has been lower than its peer in Asia and is already tapering. But there is a glimmer of hope. There is a demographic boon that needs to be nursed intensively to help India become a developed nation by 2047, the 10th year of Independence.
The demographic dividend is the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger and 65 and older).
During a demographic transition – where fertility rates decline, life expectancy rises, and workforces grow – human capital investment could trigger a demographic dividend, not only through greater economic productivity but also from more health, education and empowerment.
On the demographic front, India can aim for raising the average life expectancy from 71-74 years now to around 84 years, which is the best in the world. India’s Total Fertility Rate (TFR) will be gradually declining to about 1.8, and the population will be stabilising at about 165 crores by 2047. Being a youthful nation, the working-age population would be around 1.12 billion, making it the single largest workforce of any nation in the world.
This means that a significant portion of the global workforce increase over the next decade will come from India, and the country has the potential to leverage this for economic growth.
According to the United Nations Population Fund (UNFPA)’s State of World Population Report 2023, India’s working-age population is rising and stood at 68% compared with 67.3% in 2020 and 66% in 2015. China, on the other hand, has a working-age population of 69%, but it is declining from 70.3% in 2020 and 73% in 2015. India’s population in 2023 stood at 1,428.6 million compared to China’s 1,425.7 million.
Now, India’s population is estimated to be 1.46 billion compared with China’s 1.42 billion. But that’s where the comparison ends.
To become a developed nation, India will have to aim to become a leading global economy, a driver of global economic growth, and a magnet of global talent, trade and capital. Its cities and markets will be among the largest and topmost business and financial centres of the world. India will have to aim to have Indian-origin Global Business Champions in manufacturing, services, agriculture, R&D and innovation with Indian firms working on the frontiers of innovation, technology and scale. Have a vibrant rural economy with rural standards of living at par with urban areas and average rural incomes (both farm and non-farm) comparable with the per capita income of the country.
India has remained the fastest-growing major economy in the world for the last few years and will continue to remain so in the next few years as well.
However, rapid economic growth has not translated into productive employment and decent work opportunities for the vast majority of India’s labour force, 90% of them being informal.
It means that employment is predominantly of poor quality, is self-employment and casual employment. As a consequence, wages are also stagnant and or declining, making work even more precarious for a large swathe of workers.
According to the International Labour Organisation, decent wages are central to economic and social development and to advance social justice and highlighted their essential role in reducing poverty and inequality and ensuring a decent and dignified life.
India’s worker population ratio is rising, and the number of employees is growing faster than the growth rate in population. Among the three categories of workers — casual workers, salaried workers and self-employed– the first category saw the fastest rise in wages, whereas the second category is not seeing much increase. So, there is an urgent need to address gaps in education and skilling on which states have to focus on more.
Given that with nearly 8 million young workers added to the labour force each year, India is at a turning point and needs to do everything to create as many as 8 million new jobs every year.
In India, the Centre and states’ combined investment in education is around 2.9% of the GDP, much lower than the required rate of 6%. In health, another critical area, public investment is just 1% of GDP. The 15th Finance Commission had recommended that India’s public expenditure on health should increase to 2.5% of GDP by 2025.
For a developing country like India, with the largest population, there is always a fight for resources between social and infrastructure development and committed expenditures like salary, pension and interest cost.
While employment generation and skill development are government priorities, the extent to which India reaps a demographic dividend will also depend on the mental health of our workers.
The Economic Survey 2024-25 examined the impact of work culture, lifestyle and eating habits on mental health. These are some of the areas where the state has to step in also.
Scientific evidence abounds that the consumption of ultra-processed foods (high in fat, salt and sugar or HFSS) is a big factor in undermining both physical and mental health. In this regard, globally, self-regulation has been ineffective. The Survey suggested the need for stringent front-of-the-pack labelling rules and enforcement by the government agencies.
According to a WHO report published in 2023, India’s consumption of ultra-processed foods shot up from about USD 900 million in 2006 to over USD 37.9 billion in 2019, an annual compounded growth rate of over 33%. Ultra-processed foods are too big to ignore anymore.
A 6%-7% economic growth should be possible for the economy sheerly based on present conditions. However, a key risk is if the private investment cycle does not materialise as a result of subdued consumption, it could weigh on job creation and dampen potential benefits from India’s demographic dividend.
