[Answered] Discuss various opportunities and challenges of demographic dividend in India.


Demand of the question

Introduction. What is demographic dividend?

Body. Discuss various opportunities and challenges of demographic dividend in India.

Conclusion. Way forward.


According to United Nations Population Fund (UNFPA), demographic dividend means, the economic growth potential that can result from shifts in a population’s age structure. India has one of the youngest populations (62.5% of its population in the age group 15-59) in an aging world. The demographic dividend leads to an increased labour supply that will increase the production of goods and boost savings and investment on the other.


Various opportunities related to demographic dividend in India:

  1. Labour supply: The first benefit of the young population is the increased labour supply, as more people reach working age. However, the magnitude of this benefit depends on the ability of the economy to absorb and productively employ the extra workers.
  2. Capital formation: As the number of dependents decreases individuals save more. This increase in national savings rates increases the stock of capital in developing countries and provides an opportunity to create the country’s capital through investment.
  3. Female Human capital: Decrease in fertility rates result in healthier women and fewer economic pressures at home. This provides an opportunity to engage more women in the workforce and enhance human capital.
  4. Economic growth: Another opportunity is produced by increased domestic demand brought about by the increasing GDP per capita and the decreasing dependency ratio. This leads to demand-driven economic growth. Growth, education, better economic security and a desire for more durable goods are the cause and consequence of young demographics.
  5. Infrastructure: Increased fiscal space created by the demographic dividend enables the government to divert resources from spending on children to investing in physical and human infrastructure.
  6. Skilled workforce: Most sectors of Indian economy would require a more skilled workforce than the present. It would be both a challenge and an opportunity for India to provide its workforce with required skill sets and knowledge to enable them to contribute substantially to its economic growth.
  7. Migration: It presents some opportunities that can arise from having demographic changes, particularly the demographic dividend and interstate migration to overcome labour shortage in some parts.


Challenges of demographic dividend in India:

  1. Enhancing human capital: Poor human capital formation is reflected in low employability among India’s graduates and postgraduates. According to ASSOCHAM, only 20-30 % of engineers find a job suited to their skills. Thus, low human capital base and lack of skills is a big challenge.
  2. Low human development: India ranks 130 out of 189 countries in UNDP’s Human Development Index, which is alarming. Life expectancy at birth in India (68 years) is much lower than other developing countries. The mean years of schooling and expected years of schooling and need to be improved.
  3. Informal economy: Informal nature of economy in India is another challenge in reaping the benefits of demographic transition in India. Nearly 216 million people are engaged in the agriculture sector, are in the informal economy where not only they earn lower wages, but with little social security and few days of employment in a year.
  4. Jobless growth: There is a mounting concern that future growth could turn out to be jobless due to deindustrialization, de-globalization, the fourth industrial revolution and technological progress. As per the NSSO Periodic Labour Force Survey 2017-18, India’s labour force participation rate for the age-group 15-59 years is around 53%, that is around half of the working age population is jobless.
  5. Asymmetric demography: The growth in the working-age ratio is likely to be concentrated in some of India’s poorest states and the demographic dividend will be fully realised only if India is able to create gainful employment opportunities for this working-age population.
  6. Issue of tilted sex ratio: Declining female labour force participation: According to data from the International Labour Organization and World Bank, India’s female labour force participation rates have fallen from 34.8 % in 1990 to 27 % in 2013. Without women participation India can’t dream of reaping demographic dividend.


Way forward: Indian policymakers will need to recognize that realization of the demographic dividend depends on an economy’s capacity to absorb workers into productive employment. This capacity is strengthened by:

  1. Building human capital: India has to invest more in human capital formation at all levels, from primary education to higher education, cutting-edge research and development as well as on vocational training to increase the skill sets of its growing working-age population.
  2. Skill development: Skill development is needed to increase employability of young population. Government has established ‘Skill India’ as a mission to skill India’s youth and the National Skill Development Corporation (NSDC) with the overall target of skilling/up skilling 500 million people in India by 2022.
  3. Education: Enhancing educational levels by properly investing in primary, secondary and higher education is important. As recommended by the National Health Policy 2017 and the National Policy on Education 1986, India needs to increase its spending on health and education to at least 2.5 % in 6 % of GDP respectively from its current levels.
  4. Health: Improvement in healthcare infrastructure would ensure higher number of productive days for young labour force, thus increasing the productivity of the economy.
  5. Job Creation: The nation needs to create ten million jobs per year to absorb the addition of young people into the workforce. The number of formal jobs have to be created, especially in labour intensive, export-oriented sectors such as textiles, leather and footwear, gems and jewellery etc.
  6. Good governance: Effective avenues for citizen input, well-functioning institutions, respect for the rule of law, low level of corruption, respect for property rights, sanctity of contracts etc. are important aspects of good governance that enable equal opportunity to all.


If India has to reap the benefits of ‘demographic dividend’ in the years ahead, it is imperative that investments in social infrastructure by way of education, skill development, training and provision of health care facilities are made to enhance productivity of workforce and welfare of the population. Though India has initiated all pertinent programmes and policies, to make the dream of demographic dividend a reality the key lies in their effective and efficient implementation.

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