India’s Demographic Dividend: Significance & Challenges

India has experienced rapid population growth for decades, but contrary to earlier doom predictions, this growth has opened up new opportunities for economic development. As of 2023, India has surpassed China to become the most populous country, with an estimated population of 1.44 billion.
According to the United Nations Population Fund (UNFPA), India’s demographic dividend is an opportunity to drive economic growth, with 62.5% of its population in the age group of 15-59, making it one of the youngest nations in an aging world.

What is a Demographic Dividend?

Demographic dividend refers to the economic growth potential resulting from changes in a population’s age structure. It occurs when the working-age population (typically 15-64 years) is larger than the dependent population (children and elderly). This shift can lead to increased productivity, higher savings, and more investment.

India’s Demographic Status

Current Population: As of 2023, India’s population has reached 1.44 billion, surpassing China’s 1.42 billion, becoming the world’s most populous country (UNFPA, 2023).
Fertility Rate: India’s total fertility rate has sharply reduced from 5.9 births per woman in 1951 to 2.0 births per woman currently, as per NFHS-5. This is below the replacement-level fertility of 2.1 births per woman.
Population Projections: By 2050, India’s population is projected to reach 1.67 billion, peak at 1.7 billion by 2064, and stabilize at 1.53 billion by 2100 (UN Population Division).
Youthful Workforce: With two-thirds of its population aged between 15-64, India holds a significant demographic advantage, potentially driving economic growth if harnessed effectively (UNFPA, 2023).

Significance of Demographic Dividend

Enhanced Economic Growth: India’s working-age population (15-64 years) will reach 67% by 2030, driving productivity and GDP growth, potentially increasing per capita income.
Increased Savings and Investments: A larger workforce boosts savings and investments, funding infrastructure and innovation. India’s household savings rate has consistently been above 30%, fuelling economic growth.
Social Development: A youthful workforce can improve education and healthcare, advancing progress on SDGs like poverty reduction and literacy.
Boost to Innovation and Entrepreneurship: With over 60,000 startups, India’s young population fosters entrepreneurship and innovation, diversifying the economy.
Global Competitiveness: India’s demographic advantage positions it as a global manufacturing hub, attracting foreign direct investment, which reached $84 billion in 2022.
Improvement in Dependency Ratio: The increasing share of working-age individuals lowers the dependency ratio, currently at 46.3%, allowing for better resource allocation.
Improved Governance and Policy Implementation: A larger workforce provides a bigger tax base, enabling more effective governance and resource distribution for social welfare.

Challenges in Achieving Demographic Dividend

Lagging Human Development Indicators: India ranks 134th in the UNDP Human Development Index (2023/24), reflecting low life expectancy and education quality.
Prevalence of Hunger and Malnutrition: Ranked 105th on the Global Hunger Index (2024), India faces high stunting, wasting, and anaemia rates, particularly among women and children.
Skill Gap and Poor Human Capital: Over 70% of youth lack job-relevant skills, and only 20-30% of engineering graduates find suitable employment, indicating a significant skills-employment mismatch.
Low Female Workforce Participation: Female Labour Force Participation is only 37% (PLFS 2022-23), limiting economic growth and productivity.
Dominance of Informal Economy: About 92% of India’s workforce is in the informal sector, where workers face low wages, insecurity, and limited upward mobility.
Jobless Growth: With a labour force participation rate of just 53% (NSSO 2017-18), India faces insufficient job creation, compounded by deindustrialisation and technological disruptions.
Health and Productivity Issues: Poor health and rising non-communicable diseases (NCDs) reduce workforce productivity, hindering economic growth.
Technological Lag: Insufficient investment in high-tech industries slows India’s transition to a knowledge-driven economy, affecting global competitiveness.

Way Forward: Harnessing India’s Demographic Dividend

Build Human Capital: Invest in quality education, healthcare, and skills to create a globally competitive workforce, implementing NEP 2020 effectively.
Strengthen Skilling Initiatives: Expand NSDC programs with industry-aligned curricula focused on AI, green energy, and digital entrepreneurship.
Invest in Education: Increase public education spending to 6% of GDP and promote equitable digital learning access.
Enhance Health and Nutrition: Boost public health expenditure to 2.5% of GDP and strengthen programs like Ayushman Bharat and POSHAN Abhiyaan.
Promote Job Creation: Focus on labour-intensive sectors like MSMEs, simplify labour laws, and improve ease of doing business.
Increase Female Workforce Participation: Provide gender-responsive policies, flexible work options, and workplace safety measures.
Leverage Emerging Technologies: Support R&D in quantum computing, biotechnology, and renewable energy with decentralized innovation hubs.
Address Regional Disparities: Foster inter-state partnerships to balance workforce demands and implement a regional demographic plan.
Constitute a High-Level Task Force: Create a task force under the PM to align demographic dividend goals with national development strategies.
Foster Entrepreneurship: Encourage startups and small businesses with better access to finance and entrepreneurship programs in education.

India’s demographic dividend is a golden opportunity to drive growth and development. As PM Modi stated, “Population control is a form of patriotism,” underlining the importance of sustainable policies to transform this potential into a powerful force for national progress and global leadership.

Reference: Deccan Herald

UPSC Mains PYQs – Theme – Population

Discuss the main objectives of Population Education and point out the measures to achieve them in India in detail. (2021)
Critically examine whether growing population is the cause of poverty OR poverty is the main cause of population increase in India. (2015)
Why do some of the most prosperous regions of India have an adverse sex ratio for women? Give your arguments. (2014)

PMF IAS Pathfinder for Mains – Question 14

Q. “India’s demographic dividend offers both opportunities and challenges.” Discuss the factors driving this phenomenon and suggest measures to address the associated challenges. (250 Words) (15 Marks)

Approach

Introduction: Briefly introduce the answer by mentioning India’s demography and its relevance.
Body: Discuss the opportunities & challenges of India’s demographic dividend & the factors driving this phenomenon.
Conclusion: Conclude the answer by mentioning PM Modi on population control and planning.