India's Demographic Dividend - Update Skills, Upgrade Industry, Uplift Infrastructure - For Development and Growth

By Mohammad Anas Wahaj; MBA, University of Illinois at Urbana-Champaign, 2000, USA; BS in Mechanical Engineering, Aligarh Muslim University, 1993, India
Dated: 04 May 2017

India's demographic dividend can only achieve full potential if its young population continues to update their skills, the private sector continues to upgrade its processes, technologies and management practices to remain profitable and growth oriented, and government continues to improve infrastructure, ease regulations to do business, and attract internal and foreign funds as investments in various industries and businesses.

United Nations Population Fund (UNFPA) defines demographic dividend as, '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)...It is a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents...A country with both increasing numbers of young people and declining fertility has the potential to reap a demographic dividend.'

Approximately half of India's 1.2 billion people are under the age of 26. By 2020, around 64% of India's population will be in the working age group of 15-64 years, and it is forecast to be the youngest country in the world, with a median age of 29. Moreover, India is a US$ 2 trillion economy, growing at approximately 7% year on year. It has a strong domestic focus with approximately 75% of the GDP generated on domestic consumption.

India's demographic dividend will work in favour of the Indian economy when its young, educated and healthy population, is trained, skilled and gainfully employed, giving rise to an upwardly mobile consumer class. India houses around 50 crore young consumers, which is equivalent to the combined population of Brazil, Germany, Russia and the UK. According to an IMF report, over the next two decades the continuing dividend in India could add about two percentage points per annum to India's per capita GDP growth. Moreover, this trained workforce and consumer class will also be highly competitive with other nations and will make India a balanced industrial, consumer and investment attractive nation.

But, India's economic growth with all the positive economic numbers is not without challenges. Experts worry that its GDP growth is happening without substantial increase in employment numbers. Recent survey of about 6,000 young people aged between 15-34 by Centre for the Study of Developing Societies (CSDS) found that 18% of respondents cited unemployment as India's biggest problem, while 12% mentioned poverty and inequality. More than 70% said they were anxious about their own job situation.

Another 2016 survey from the labour bureau found that almost 80% of India's total labour force was either self-employed or working as casual labour. The CSDS study also found that self-reported unemployment rates are higher among graduates than among those without degrees. World Bank's 'Ease of Doing Business' list ranks India near bottom at 142. It continues to lag behind other Asian economies in the share of manufacturing in GDP. Moreover, there are issues related to infrastructure, bureaucratic hurdles and excessive regulation.

Report by Indiaspend looked at the issue of employment and made six observations - (1) Fewest addition in organised-sector jobs in seven years across eight important industries. (2) The proportion of jobs in the unorganised sector is set to rise to 93% in 2017. (3) 10 year low rural wages. (4) Widespread 'under-employment' and temporary workers. (5) The formation of companies has slowed to 2009 levels. Existing companies are growing at 2%, the lowest in five years. (6) With large corporations and public-sector banks financially stressed, the average size of companies in India is reducing. These observations indicate challenging employment scenario.

India continues to have severe staff shortage, ranging from 20% to 50%, in crucial services. Following data relates to shortages in core services - EDUCATION: 10 lakh teachers are required in elementary and secondary schools across the country, with around 6,000 vacancies in premier institutes like the IITs, NITs and IIMs together. Another 6,000 posts are vacant in central universities. In engineering colleges, 29% of the 4.2 lakh sanctioned posts for faculty in undergraduate courses remain vacant. (Source - Ministry of Human Resource Development - MHRD). HEALTHCARE: The doctor-patient ratio stands at a dismal 1:1560 vis-a-vis allopathic practitioners. Considering about 7 lakh AYUSH practitioners, the ratio comes to 1:707. Experts say rural areas account for most of these vacancies, adding that the lack of infrastructure deters practitioners from setting up base there. (Source - MCI). POLICE/LAW ENFORCEMENT: India's police force has been functioning under shortage, with almost 24% of the sanctioned posts vacant as of January'17. Moreover, CBI (Central Bureau of Investigation) have 22% vacancies, while ED (Enforcement Directorate) is functioning at just 36% of its sanctioned strength. DEFENCE: While the 41% vacancies in technical and 44% in non-technical staff at ordnance factories are affecting production schedules and R&D, the three wings of the armed forces are together short of 55,000 personnel.

Although government is taking steps in the right direction with 'Make in India', 'Skill India' and 'Digital India', but the success depends on their efficient implementation and execution. The potential for businesses to more fully incorporate India into their global manufacturing strategies is also driven by the boom in Indian consumer spending. Between 2006 and 2011, consumer spending in the country almost doubled, from US$ 549 billion to US$ 1.06 trillion.

'Skill India' intends to equip large number of youth with technical and working skills to get absorbed at various levels in the industry. Improvement in infrastructure, supporting local manufacturing and attracting global investments in manufacturing sector will help to absorb trained talent.

India's IT services sector had been major source of revenues and global influence. But considering recent calls of protectionism in many western countries, a new strategy is the need of the hour. India's IT companies have to expand their services in domestic market. 'Digital India' policy should facilitate and support in this transition and progress.

Every industry and sector in India has a scope for improvement and need for scale-up for both domestic and international consumption. Moreover, new and emerging industries can be promoted by building entrepreneurial ecosystems around educational and research institutions. This will also boost technology and research commercialization and help in developing industry-academic partnerships for long-term economic benefits.

Demographic dividend will benefit only when there are jobs for the young and restless. Their energies are to be channelized in the right direction. Providing jobs where the population resides is both a challenge and opportunity. Special focus should be there to build regional hubs for diverse set of businesses and promote local hiring.

Many nations are looking after their ageing populations, while in India the proportion of dependants among the population as a whole is forecast to fall until 2040. This can be a healthcare opportunity for India. It can export trained healthcare workforce to these ageing nations while also attracting elderly medical tourists for best value for money treatment and stay in India. Moreover, it will also help India in having a ready healthcare workforce and infrastructure for its ageing population in future.

The multi-pronged strategy, 'Update skills, Upgrade industry, Uplift infrastructure', is a perpetual mechanism to build better and economically powerful India with enhanced employment opportunities. Every economy needs continuous business growth and skilled workers to thrive. Large working class population that is gainfully employed will add to consumption and invigorate economy.

List of References

1. Demographic Dividend | Wikipedia, 03 may 2017
2. Youth unemployment bucks India's rapid growth | Kiran Stacey, The Financial Times, 21 apr 2017
3. India growth story! You may miss the bus if you can't smell the opportunity | Arun Thukral, The Economic Times, 19 apr 2017
4. A population of over 1.2 billion, but India reeling under critical vacancies | Chetan Kumari, Times of India, 17 apr 2017
5. Why India May Miss The Demographic Dividend | Aakar Patel, Outlook, 28 aug 2016
6. India's demographic dividend | Thomson Reuters, 07 jul 2016

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