Is India Utilizing its full potential of demographic dividend ?

            Now a days lot of buzz is around working hours of youth in the country . This is small step to find out the reality . The mere existence of a larger working age population does not constitute a demographic dividend. For it to be a dividend, first, the working age population must be in the labour force. Second, they must be productively employed. Otherwise, a large number of people in the working age group who are not productively employed can represent a huge challenge to the economy . Although a larger proportion of India’s population is of working age, those between the ages of 15 and 64 only make up 51% of the country’s labor force, compared to 76% in China. To achieve the same labor force size as China by 2030, India would need to achieve a participation rate of over 70%. It’s not just India’s low labor rate that poses a problem, the productivity of its workforce is another challenge. According to the International Labour Organisation, the labour force ‘comprises all persons of working age who furnish the supply of labour for the production of goods and services during a specified time-reference period’ (International Labour Organization, 2019). The demographic dividend can be defined as the process of acceleration of economic growth owning to the changes in the age structure of a country’s population with the transitions from high to low birth and death rates, resulting in a higher share of working age population. The Indian economy was passing through a phase demographic dividend, in which the share of working population was the highest (Aiyar and Mody 2011; Joe et al. 2018; Mehrotra 2015). But with falling total fertility rate, the share of elderly population has started rising (it increased from 8.2% to about 10.2% during 2011–12 and 2018–19). The decline of overall labour force participation rates (Kannan and Raveendran 2019; Parida 2015; Mehrotra and Parida 2021) and an upsurge in youth unemployment (Mehrotra and Parida 2019, 2021), have certainly put questions on the process of harnessing demographic dividend (which is going to disappear during post 2040, and India will become an ageing society for ever) in India. Since the structural transformation, which began during post 2004–05 seems to be stalled during 2017–18 (Mehrotra and Parida 2021), the rising enrolments in higher educational institutions (in general, technical and vocational education) in recent years (Kannan and Raveendran 2012; Mehrotra and Parida 2019) is likely to exacerbate the problem of educated youth unemployment and employability issues. The total population in India continued to increase from about 0.89 billion to about 1.33 billion during 1993–94 and 2018–19 . During this period, the number of youth (age group 15 to 29 years) increased from about 240 million to 362 million, while number of elderly population (age 60 years and above) increased from 59 million to about 135 million (a massive rise during post 2004–05 period). The growth rate of total population declined from 2.1% per annum during 1993–94 and 2004–05 to 1.5% per annum during 2004–05 and 2018–19. Similarly, the growth rate of youth population declined from 1.9% per annum during 1993–94 and 2004–05 to 1.8% per annum during 2004–05 and 2018–19. But the growth rate of elderly population increased from 3.0% per annum during 1993–94 and 2004–05 to 5.1% per annum during 2004–05 and 2018–19. Since, the growth of youth population (age 15–29 years) already started declining with a corresponding rise in the share (from 8 to 10.2%) and growth (3–5.1%) of elderly population, unless necessary measures are taken at the earliest, Indian economy is going to lose its demographic dividend forever and it would become an ageing society without sufficient economic prosperity like that of the developed countries of the Global North. The share of youth in the total population increased from 26.5% to about 27.2% during 2004–05 and 2018–19. But the share of youth in total work force declined from about 36.0% to 33.6% during 1993–94 and 2004–05, and further to 29.0% during 2001–12 and to 24.3% during 2018–19 . The falling share of youth in total workforce could be due to both supply and demand side factors. On the supply side, since a large number of youth (both boys and girls) were attending higher education (Mehrotra and Parida 2019), they could have remained out of the labour force for a considerable period of time (but they have already started joining the labour force, which is reflected by massive increase in educated unemployment). The negative income effect due to rising standard of living and falling incidence of income poverty (Chauhan et al. 2016) and stagnant real wages (Mehrotra and Parida 2021) might discourage many youth to remain out of labour force. On the other hand, demand side factors like lack of industrialisation and slow growth of manufacturing sector, falling investment and output growth in infrastructure sector, skill miss-match issues (NSDC 2013; Mitra 2013; Mehrotra 2014; Singh & Parida 2020) and growing mechanisation/automation in agriculture (Mehrotra et al. 2014) etc., might have negatively affected the growth of youth employment in both rural and urban India. While total unemployment (based on UPSS,) increased from about 7 million during 1993–94 to about 11 million until 2011–12, it increased massively to 29 million during 2018–19. Among total unemployed, youth alone constitutes about 24 million (about 82.5%). These statistics clearly show how the general education system has completely failed in improving youth employability in India. Youth “Not in Labour Force, Education and Training (NLET)” increased in India by about 2 million per annum during 2004–05 and 2011–12, which further increased by about 3 million pa in 2011–12 and 2017–18. About 100.2 million youth declared themselves as NLET during 2017–18 . The situation is alarming because an additional 127 million youth are currently attending education and training (in addition to those currently unemployed or currently NLET). After completing education/training they would either search for jobs or would remain NLET. If they join the labour market, the unemployment rate would increase further. But if they prefer to remain NLET, it would increase the volume of disheartened labour force or the so called “potential reserve army”. These increased NLET youth along with the elderly population (which started growing) would constitute the total demographic liability of the economy as a whole. This is an indication of the labour market crisis that Indian economy is currently passing through. Unless this problem is addressed, at the earliest, it will have negative implications on both economic growth as well as the process of harnessing demographic dividend in India. However, if measures are taken to create non-farm jobs in both rural and urban areas, India could still harness its demographic dividend. It can be stated that the growth of enterprises size (in both manufacturing and service sectors) is necessary to boost the growth of quality jobs as well as to ensure global competitiveness of Indian enterprises. Hence, suitable measures (pro-growth measures for the enterprise) should be taken that would help micro and small firms to grow into medium and then large scale enterprises in the long run. The total population will increase by just over 25% from 2020 to 2060 (from 1.38G to 1.77G). The increase in the total population will at first happen mainly among its working-age segments to then make a gradual shift to the elderly population, which is anticipated to multiply by 4 between 2020 and 2060. Consequently, the age dependency ratio (ADR) will for many years remain close to 0.5, a level similar to what was observed in Western Europe from the mid-80’s to the mid-00’s, before starting to slowly increase in 2050, finally reaching 0.6 in 2060, as the country will face a population aging resulting from the last stages of the demographic transition. While the process is underway, India could benefit from a demographic dividend for most of this period. In comparison, this ratio exceeds 0.9 in countries less advanced in their demographic transition such as Niger or Mali, and 0.6 in countries facing population aging such as Japan or Finland (United Nations, 2019b). However, when looking at the projection outcomes by labour force status, the situation is not as favourable. Indeed, the labour force dependency ratio (LFDR) is much higher than the age dependency ratio (ADR) in 2020 (1.7 vs 0.5). In other words, when looking at this more accurate indicator of economic burden, the number of non-workers is 70% higher than then number of workers, while the ADR shows much higher numbers of people in the working-age group than outside it. As explained before, this is because a large part of the potential workers (the working-age population), in particular women, do not participate actively in the labour market. The importance of increasing female labour force participation is necessary in order to fully benefit from the demographic dividend. With one of the lowest female labour force participation rates in the world, India is likely to be in the middle of the U-shaped relationship between female labour force participation and economic development, as women have gradually exited the labour market over the past few decades following improvements in their husbands’ wages, reducing the need to work to survive (Verick, 2018). China has succeeded in reducing their informality through an improvement in labour force participation rate of both men and women through a structured industrial and skilling policy along with a few reform measures. India could also have achieved this by now through a structured and strategic industrial policy in past (during early 1980s or 1990s), but unfortunately until today, we are still far away from these measures. Labor reforms also due for many decades . Indian public policy need serious look into it before it is too late to act .