India: How to harness Demographic Dividend?

“Indeed India’s demographic dividend will turn into a demographic disaster as large numbers of unemployed youth provide foot soldiers for all kinds of agitations – whether Patelist, casteist, regionalist, communalist or communist. That’s why it’s vital to push reforms now”.

TOI Editorial

While addressing a gathering at the Townhall event at the Facebook’s sprawling headquarters in Menlo Park near Stanford University on September 27, 2015, Prime Minister Narendra Modi made a bold claim that “the 21st century will be an Indian century”. It is because India is blessed with 3 Ds - Demographic Dividend, Democracy and Demand. According to PM Modi these three things are present in one country, this is not there anywhere in the world.  In other words, blessed with a vibrant democracy, with 65 percent of its people under the age of 35, and a market of 1.25 billion people, it is widely believed that India will cross new heights in this century. “India is among the few bright spots in the global economy”, as per the IMF Chief Christine Lagarde.

Among three Ds, first one – ‘Demographic Dividend’ - is most important and PM Modi has seldom shied away from referring about it.  The term was coined by the team led by Harvard economist David Bloom in the nineties.  The concept is based on the premise that population age structure, more than size or growth per se, affects economic development, and that reducing high fertility can create opportunities for economic growth if the “right kinds of educational, health, and labor-market policies are in place”.[1]  In other word, the demographic dividend occurs when a falling birth rate changes the age distribution, so that fewer investments are needed to meet the needs of the youngest age groups and resources are released for investment in economic development and family welfare. [2] 

We are time and again reminded that India has one of the largest proportions of population in the younger age groups in the world. The median age is a single index that summarizes the age distribution of a population. It divides a population into two numerically equal groups; that is, half the people are younger than this age and half are older. The median age of population in India was 25 years in 2010, as against 35 in China, 37 in USA, 44 in Germany and 45 in Japan. The corresponding figures would be 37, 49, 40, 49 and 52, respectively in 2050.

With around two-third of the population (around 795 million) under 35 years of age that is young population in 2011, India can afford to dream to become economic power in the world before the middle of this century. Of this 48.2 per cent are women and 51.8 per cent are men, 30.1 per cent reside in urban areas and 69.9 per cent is based in rural India. India’s young population has risen significantly in the last 20 years from 605 million in 1991 to 795 million in 2011, thereby opening a window of demographic opportunity. Now question arises whether India is geared enough to garner its demographic gift?

The conventional view is that India will be able to put all these people to work because of its relative strong education system, entrepreneurial zeal, and strong links to the global economic mainly due to the proficiency in English.  “All that is real, but India is already showing some of the warning signs of feared growth stories, including early on set of over confidence”, as noted by Ruchir Sharma in his book:  Breakout Nations: In Search of The Next Economic Miracles (2012). He writes further: “Yes, a growing pool of young workers can be huge advantage, but only if a nation works hard to set them up for productive career” (page 56).

No doubt, when conditions are right, large numbers of young workers can drive a nation’s growth to remarkable levels, as has been seen in most of East and South-East Asian Economies. An analysis of Table 1, however, places talks of India’s ‘demographic dividend’ in stark bleak perspective. It is because a sizable proportion of this young population is a result of unwanted fertility. Based on the National Family Health Survey-3 (IIPS, 2007), it is estimated that   about 34 per cent or around 272 million young people in the age group 0-35  in 2011 was the product of unwanted childbearing. The proportion of young population resulting from the   unwanted fertility has increased significantly from 21 per cent in 1991 to 26 percent in 2001 to 34 percent in 2011 (Col. 4), mainly due to lack of client centred family planning services . [3]

Table 1 India:  Trends in level of young population resulting from unwanted fertility, 1991-2011.

Census year	Total population (in million)	Total population aged 0-35 (in million)	Total population aged 0-35 result of unwanted  fertility  (in million)	Per cent of total unwanted population in age group 0-35
1	2	3	4	5
1991	846.4	605.2	127.7	21.1
2001	1028.7	720.0	190.0	26.4
2011	1210.8	794.3	272.4	34.4
Computed by the author by using Fertility Planning data obtained from National Family Health Survey 1, 2 & 3 and Registrar General of India.  For details, see: Devendra Kothari, “Implications of Emerging Demographic Scenario: Based on the Provisional Results of Census of India 2011”,  A Brief,  a publication of Management Institute of Population and Development – A Unit of Parivar Seva Sanstha, New Delhi, 2011

Further, Table 2 indicates that distribution of unwanted young population is very unevenly distributed as compared to the general population. Most of the young population was enumerated in the poorly developed states of India. For example, Uttar Pradesh and Bihar accounted for 300 million or 25% of the total population of the country in 2011.  Out of this, 213 million people are less than 35 years of age, and they make 27 percent of total young population of the country.  However, due to high level of unwanted fertility, 114 million or 54 percent of the young population of these two states could be classified as a product of unwanted pregnancies (Col. 7, Table 2). In other words, 43 percent of total unwanted young population of the country was enumerated in these two stares.

Table 2: Distribution of young population by ten most populated states of India, 2011.

State	Total population		Total young population in age group  0-34 years		Total persons result of  unwanted  child bearing in age group  0-34 years
	Persons (in  Million)	%  of  total population	Persons (in million)	%  of  total young population	Persons (in  million)	%  of  total unwanted persons
1	2	3	4	5	6	7
Uttar Pradesh	199.8	16.5	139.5	17.6	74.2	27.3
Maharashtra	112.4	9.3	70.5	8.9	11.3	4.1
Bihar	104.1	8.6	74.0	9.3	40.3	14.8
West Bengal	91.3	7.5	57.2	7.3	15.4	5.6
Andhra Pradesh	84.6	7.0	52.6	6.6	8.1	3.0
Madhya Pradesh	72.6	6.0	49.5	6.2	18.0	6.6
Tamil Nadu	72.1	6.0	42.1	5.3	7.9	2.9
Rajasthan	68.5	5.7	47.4	6.0	17.1	6.2
Karnataka	61.1	5.1	38.2	4.8	10.1	3.7
Gujarat	60.4	5.0	39.1	4.9	9.1	3.3
Sub total	926.9	76.6	610.1	76.9	211.5	77.5
Rest of India	283.9	23.4	184.2	23.1	60.9	22.5
Total (India)	1210.8	100.0	794.3	100.0	272.4	100.0
Computations are based on data obtained from Census of India and National Family Health Surveys 1, 2 and 3.

The consequences of unwanted fertility are serious. It results in poor physical growth, reduced school performance, diminished   concentration in daily tasks thus impacting work capacity and work output resulting in diminished earning capacity or productivity; and it is reflected in widespread poverty, illiteracy, under-education (little or poorly), unemployment, under employment, etc. [4] As a result, the current pool of India’s labour force has very low employability mainly due to low productivity. If the labour productivity is low, then employers do not hire workers. And that is happening in India.

India graduates more than five million graduates every year. Engineers comprise a small (but significant) part of it at around six hundred thousand, whereas the rest take up a variety of three or four year bachelor degree programs. The National Employability Report 2013, [5]  compiled by Aspiring Minds, reveals that a significant proportion of graduates, nearly 47 per cent were found not employable in any sector, given their poor English language and cognitive skills. The report also indicates that only 17.4 per cent of technical graduates (engineers) in the country are ready to be employed. What this also means is that the rest, that is, 82.6 per cent, engineering graduates are unemployable. Again, their lack of English language knowledge and cognitive skills were identified as the major obstacles to their suitability in the job market.

As a result, job market is not expanding. Census data reveal that the number of people seeking jobs grew annually at 2.2 per cent between 2001 and 2011, but growth in actual employment was only 1.4 per cent. Further, an ASSOCHAM (Associated Chambers of Commerce and Industry of India) study shows as many as five million jobs were lost in India between 2004-05 and 2009-10, technically a period of high growth. In addition, jobs are not available. For example, when the Government of Uttar Pradesh advertised for the post of 368 peons on August 11, 2015, it could not have guessed the response be so overwhelming.  Over 2.3 million candidates applied for these posts (over 6250 per post). The minimum qualification for the post was Class V pass but only 53, 000 of the  candidates who had applied has not studies  beyond Class V. Rest of applicants include those with degrees like BTech, MSc and MCom, besides 255 youths with PhDs.

It appears that problem of unemployment has taken a serious turn and there is apprehension of its becoming still grim in the future. According to the ILO report, India is experiencing “jobless growth” [6] due to the fact that total employment grew by only 1.1 million from 2004/05 to 2009/10 (based on the National Sample Survey), representing an employment elasticity of almost zero. This shows that economic growth, even when it takes place, does not create as many jobs as it is skewed towards capital - or skills-intensive sectors rather than labour intensive manufacturing. Gujarat itself confirms the picture – it is a manufacturing powerhouse that specializes in capital intensive products such as petrochemicals, drugs and plastics. There is an urgent need to build skills with an industry focus to avert demographic dividend from turning into demographic bomb. The Patel unrest whose intensity took the country by surprise could already be one manifestation of this. Clearly, India is frittering away the opportunity of capitalizing on the 'demographic dividend'.

The promise of ‘demographic dividend’ will not last long. Can India take advantage of this demographic window in the next couple of decades? Are our education and other  systems geared enough to meet this challenge today?  One cannot be too optimistic about considering its poor education system from bottom to top. It is widely believed that despite being among the world’s youngest countries, India will not reap its demographic dividend if its education remains the mess it currently is.  The Annual Status of Education Reports (ASERs), prepared  by Pratham NGO, have repeatedly shown that less than half of Class V students can read a paragraph or do a simple arithmetic sum from a Class II text.  Indian secondary school going children were second last in an OECD Programme for International Student Assessment (PISA) the last time they took part (2011). Also, higher education is not in better shape.  No Indian university is currently ranked among the world’s top 200. India is the only BRICS nation without representation in the top 100 global universities. There may be many reasons behind this sorry state of affairs, but the issue of unwanted fertility has also played an important role in lowering the quality of education.[7] Winner of the 2015 Nobel Prize in Economics Prof. Angus Deaton, who spent a considerable amount of time working on the connection between ‘stunting’ among Indian children, concluded that widespread growth faltering was a human development disaster  as height reflected early life nutrition which helps brains to grow. “There are tremendous health problems among adults and children in India…half of the children are still malnourished”.[8]

India’s vast young population (currently, around 900 million people are under 35 years of age) is its strengths and therefore one has to mobilize them to go forward fast. So what need to be done to unlock India’s potential? In other words, what should be agenda for enhancing human capital?  No doubt, putting the economy back on track should be the government’s first priority. It is because India’s demography is such that we have to create a million additional jobs every month. This can only be done by making it easy for job-creating businesses to run, facilitating not just big companies but more importantly small scale industries which create the most jobs. However, for sustainable development it is equally important to focus on human capital. Central to the human development approach is the concept of capabilities. For this, it is must to build skills with an industry focus to avert the demographic dividend from turning into a demographic bomb. In addition, better education will turn India into not just a manufacturing hub but also a hub for research and design like Silicon Valley. It is worth noting that Indian-born people have been responsible for starting up 16 per cent of Silicon Valley’s technological companies.

India’s demographic bulge needs not only a sustained does of quality education from top to bottom and practical skills for employability and productivity but also sincere efforts to minimize the incidence of unwanted fertility to harness the demographic dividend. The World Bank estimates that the prevalence of underweight children in India is among the highest in the world with dire consequences for mobility, mortality, productivity and economic growth.[9] As such, reduced level of unwanted fertility will result in fewer but wanted children and that will enhance the quality of human capital. With fewer children parents are under less strain to provide for many children. Family income can be focused more upon better food for children, including girls, who are often given less to eat. In addition, incomes can go toward prolonged education for teenagers of both sexes to improve their life prospects by improving productivity. Also, having fewer children enhances the health of women, as noted by John A. Ross (see footnote No. 2).

India’s aspirational youth are an amorphous mass; however, they are desperate to see the Modi Government succeed, if only because it is India’s last chance at getting on the high growth track which can help   to achieve an overall development. “But what is absent is a sense of self confidence and clarity over the direction we are headed", as noted by Prof. Manoj Joshi.[10]  The main concern today is the impairment of human potential, which is not allowing India to reap its rich demographic dividend. It is high time that political parties focused on improving people’s ability to earn more rather than dolling out subsidies that make people dependent on the political class and system. 

Modi won the general election promising millions of jobs for youth. Critics say this is a pipe dream looking to the present state of affairs. But experiences of East Asian economies have shown that it is possible.   Experience of these countries indicates that economic growth is not enough; it must be accompanied by structural transformation to unlock the human potential. One can learn  from these countries.  During the initial stage of development, most of Asian countries concentrate on developing human capabilities by focusing on primary health including reproductive health to reduce the incidence of unwanted fertility and focusing on the quality of  education especially school education.

As of now we have a slogan: ‘Make in India’. It must be supplemented by another slogan: ‘Enhance Human Capital’. For this we need an agenda, as noted in my earlier post entitled:  “Growth with structural transformation: A development agenda for India”. [11]

I will like to conclude in the words of N.R. Narayana,  author of highly acclaimed book: A Better India: A Better World, (2009), “Economic growth and prosperity require not just growing population, but also what economists call ‘good human capital’ – a population equipped with the skills and resources to participate in the economic. With limited progress in human development, India’s large population can become a liability rather than an advantage. A failure to stabilize India’s population will have significant implications for the future of India’s economy”. Thus the demographic predictions are loud and clear: that the promise of demographic dividend will not last long, in any case beyond 2030. Can India take advantage of this demographic window in the next couple of decades and garner its benefits? Hope policy makers are listening!

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[1] Boom, David E., David Canning and Jaypee Sevilla. 2003. The Demographic Dividend:  A New Perspective on the Economic Consequences of Population Change, Population Matters Monograph MR-1274, RAND, Santa Monica.

[2] John Ross. 2004. Understanding the Demographic Dividend, a policy paper, POLICY Project, Futures Group, Washington, DC.

[3] Kothari, Devendra and Sudha Tewari. 2009. “Slowing Population Growth in India: Challenges, Opportunities and the Way Forward”. MIPD Policy Brief No.2, Management Institute of Population and Development, a unit of Parivar Seva Sanstha, New Delhi.

[4] Kothari, Devendra. 2014. “Managing Unwanted Fertility in India: Way Forward”, Institute of Economic Growth (ed.):   National Rural Health Mission: An Unfinished Agenda, New Delhi: Book Well, pp.25-36. 

[5] For details, see: The National Employability Report Graduates 2013 at: http://www.aspiringminds.in/docs/national_employability_study_IT_aspiringminds.pdf. Also see: The National Employability Report (NER) for Engineers by Aspiring Minds at: http://www.aspiringminds.com/research-articles/exploring-national-employability-report-engineers-2014-part-i . 

[6] “Jobless growth” means a situation where the flow of output increases without a proportionate increase in employment opportunities.

[7] Kothari, Devendra. 2014. Education in India needs intensive care, not a quick fix, RAEA Policy Paper No. 1. Rajasthan Adult Education Association, Jaipur. 

[8] Refer: Angus Deaton. 1913. The Great Escape: Health, Wealth, and the Origin of Inequality, Princeton University Press

[9] Refer:  World Bank, India Malnutrition Report, 2009 at, http://siteresources.worldbank.org/SOUTHASIAEXT/Resources/223546-1147272668285/IndiaUndernourishedChildrenFinal.pdf

[10] For details, see at: http://blogs.timesofindia.indiatimes.com/toi-edit-page/same-same-but-different-parliaments-of-india-china-and-japan-are-all-pushing-reforms-but-guess-whos-ahead

[11] Refer author’s post: ‘Growth with structural transformation: A development agenda for India’ at http://kotharionindia.blogspot.in/2015/01/growth-with-structural-transformation.html.