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Special Content

Issue no 11, 10 - 16 June 2023

Demographic Dividend

India's Path to Economic Dominance & Tech Leadership


Avinash Mishra, Madhubanti Dutta

India has 1.41 billion citizens, with 67.51% of its population falling within the age group of 15-64, and a median age of 29, making it the youngest nation in the world. This contrasts with the ageing populations of several Asian nations, most notably Japan. This youthful population presents several opportunities for economic growth and development. The growing pool of young individuals represents a potential consumer base, leading to increased demand for goods and services. As these young individuals enter the workforce, they further fuel consumption and economic activity. The increasing purchasing power of this segment creates opportunities for businesses across various sectors, including retail, consumer goods, housing, entertainment, and financial services. They also contribute to the development of a more robust domestic market, fostering entrepreneurship and innovation.

The demographic power and economic rise of India and China are significant factors that will shape global dynamics in the coming decades. With each country comprising approximately 18 percent of the world's population, they collectively represent more than one-third of humanity, as quoted by the latest report of the United Nations Fund for Population Activities (UNFPA). India and China's large populations provide a substantial labour force and consumer base, which can drive economic growth and development. China has already emerged as the world's second-largest economy, while India is also making strides in economic expansion. Economic growth, infrastructure investment, and technological progress will be key factors in determining their future economic trajectories. Economic outcomes will be significantly influenced by demographic dynamics, including factors such as an ageing population and the size of the working-age population. China, for instance, is grappling with an ageing population due to its past one-child policy, which poses challenges for sustaining economic growth and maintaining social welfare systems. In contrast, India possesses a youthful and expanding population, presenting a demographic dividend that can enhance economic growth through the effective utilisation of education, skill development, and employment prospects to boost human capital.

Importance of Harnessing the Demographic Dividend for Economic Growth: India's youthful population offers advantages in terms of innovation, technological adoption, and entrepreneurship. The availability of a large talent pool allows for the development of a skilled workforce that can drive sectors such as information technology, research and development, and digital services. This demographic dividend, if harnessed effectively through education and skill development initiatives, can contribute to sustained economic growth and competitiveness. To leverage their demographic advantages and sustain economic growth, both countries need to invest in human capital development, innovation, and sustainable economic practices. Additionally, addressing issues like income inequality, environmental sustainability, and social inclusion will be critical to ensuring inclusive and balanced growth. The future economic power of India and China will depend on how effectively they navigate these demographic dynamics, implement strategic policies, foster innovation, and adapt to changing global trends.

Policy Framework for Harnessing the Demographic Dividend: It is important to note that the demographic dividend is not guaranteed and must be actively harnessed through effective policies and investments. To fully realise the economic benefits, countries need to create an enabling environment that promotes education, skill development, employment opportunities, and healthcare services for the working-age population. As the demographic transition progresses and fertility rates continue to decline, the age structure eventually shifts towards a higher proportion of older individuals. This can pose challenges, such as increased demands on healthcare systems, pension schemes, and social welfare programmes. Therefore, it is crucial for countries to plan for the potential consequences of an ageing population and implement strategies to ensure long-term sustainability and social well-being.

Becoming a $10 trillion economy by 2035 is an ambitious goal for India, and the timeline for achieving it depends on various factors, including sustained economic growth, policy reforms, investment inflows, and technological advancements. While it is challenging to provide an exact timeframe, several projections and initiatives indicate that India is working towards its vision of becoming a developed nation. The Prime Minister has launched various initiatives such as Make in India, Digital India, and Skill India to boost economic growth, attract investments, promote innovation, and enhance the country's infrastructure and human capital. These efforts, combined with structural reforms, have the potential to create an enabling environment for accelerated economic expansion. India's economic growth rate has been significant in recent years, and it has emerged as one of the world's fastest-growing major economies. However, sustaining high growth rates consistently over an extended period is crucial for India's journey towards becoming a $10 trillion economy. Several economic projections suggest that India has the potential to achieve this milestone within the next two to three decades. However, it requires continued focus on reforms, investments in key sectors, skill development, and the promotion of entrepreneurship and innovation. Factors such as geopolitical dynamics, global economic conditions, and domestic challenges can influence the pace of India's economic transformation. Adapting to these factors and addressing issues such as infrastructure gaps, income inequality, job creation, and regulatory frameworks will be critical for India's progress towards a $10 trillion economy. While the timeline may vary, India's aspiration to become a developed nation and a global economic powerhouse reflects the determination and commitment of the Government and its people. Through sustained efforts, favourable policies, and a conducive business environment, India aims to unlock its full economic potential and transition to a higher-income economy in the future The Prime Minister stated that India's data and demographic dividend, combined with its established technical proficiency, will contribute to making this decade India's "Techade." The term "Techade" represents the intersection of technology and the decade ahead, emphasising India's potential in the technology sector. The Prime Minister emphasised that India's vast pool of data, along with its young and tech-savvy population, positions the country to become a global leader in the technology space. India's data is considered a valuable resource, and harnessing its potential can drive innovation, economic growth, and social development. With a significant population of digitally connected individuals, India's demographic dividend further adds to its advantage in terms of tech adoption, entrepreneurship, and skill development. Additionally, the Honourable Prime Minister acknowledged India's proven technical proficiency, highlighting the country's track record in areas such as information technology, software development, and digital services. India's talent pool, technological expertise, and entrepreneurial spirit provide a solid foundation for the country to excel in the tech sector and contribute to global technological advancements. By leveraging its data, demographic dividend, and technical capabilities, India aims to strengthen its position as a technology-driven nation and capitalise on the opportunities presented by the digital age. The "Techade" concept reflects India's ambitions to drive digital transformation, promote innovation, and position itself as a significant player in the global technology landscape in the coming years.

Specific Policy Measures to Address Challenges and Leverage the Demographic Dividend Effectively: ‘Skilling for Future: Reaping Demographic Dividend for AatmaNirbhar Bharat' is an initiative aimed at leveraging India's demographic dividend to achieve selfreliance and economic empowerment. The term 'AatmaNirbhar Bharat' translates to ‘Self-Reliant India,’ and the focus is on developing a skilled workforce that can contribute to India's economic growth and competitiveness in the global market.The initiative recognises the importance of addressing skill gaps and equipping the Indian workforce with the necessary capabilities to meet the demands of emerging industries and technologies. By investing in skill development, the goal is to create a talent pool that can meet the requirements of a rapidly evolving economy. To achieve this, the initiative emphasises the need for comprehensive skilling programmes and initiatives that align with the evolving needs of industries and the job market. It involves collaboration between the Government, educational institutions, industry stakeholders, and vocational training providers to design and implement skill development programs. The focus of ‘Skilling for Future’ is on equipping individuals with job-relevant skills, promoting entrepreneurship, and fostering a culture of innovation. The initiative aims to address the demand for skilled professionals in various sectors, through the ‘Skilling for Future and Reaping Demographic Dividend for AatmaNirbhar Bharat’ initiative, India aims to unlock the potential of its demographic dividend by empowering its workforce with the skills needed for the future. By focusing on skill development and creating a conducive ecosystem for innovation and entrepreneurship, India aims to strengthen its position as a selfreliant and globally competitive nation including manufacturing, information technology, healthcare, agriculture, and services.

Policy Implications: Driving Sustainable and Inclusive Economic Development and Employment Generation: The Government plays a crucial role in the overall development of the demographic dividend and increasing growth opportunities. Here are some key roles of the Government in this regard:

1.      Education and Skill Development: The Government's focus on education and skill development is essential to unlock the potential of the demographic dividend. It involves ensuring access to quality education, promoting technical and vocational training, and aligning educational curricula with industry requirements. By investing in education and skill development, the Government equips the workforce with the necessary knowledge and capabilities to meet the demands of the job market.

2.      Employment Generation: The Government implements policies and programs to stimulate job creation and reduce unemployment. This includes promoting entrepreneurship, supporting startups, encouraging investment in sectors with high employment potential, and implementing targeted employment generation schemes. By facilitating job opportunities, the government maximises the benefits of the demographic dividend and reduces the risk of unemployment and social unrest.

3.      Infrastructure Development: The Government's focus on infrastructure development is vital for economic growth and employment opportunities. This includes developing transportation networks, power and energy infrastructure, digital connectivity, and social infrastructure such as healthcare and education facilities. Improved infrastructure attracts investments, facilitates business expansion, and creates a conducive environment for economic activities, leading to job creation and overall development.

4.      Healthcare and Family Welfare: The Government's role in providing quality healthcare and family welfare services is essential for the well-being of the population. By ensuring access to healthcare facilities, promoting preventive healthcare, and implementing family planning programs, the government contributes to the overall health and productivity of the workforce.

5.      Research and Innovation: The Government's support for research and innovation is critical for driving economic growth and technological advancement. By investing in research and development, promoting innovation ecosystems, and facilitating technology transfer, the government encourages the development of new industries, creates high-value jobs, and enhances competitiveness in the global market.

Long-term Economic Outlook and Projections Based on Demographic Trends: While demographic transition can provide a potential dividend for economic growth, it requires proactive policies and investments to capture these benefits effectively.

1.      Investments in Human and Physical Infrastructure: Scaling up investments in human and physical infrastructure is crucial to promote entrepreneurship, create jobs, and enhance economic productivity.

2.      Investment in Education: Education plays a pivotal role in preparing the working-age population for the demands of the economy. It is crucial to invest in quality primary, secondary, and tertiary education to equip individuals with the necessary skills and knowledge

3.      Promote Entrepreneurship and Job Creation: Given the large share of the working-age population, fostering entrepreneurship and job creation becomes paramount. This can be achieved by creating an enabling environment for startups and small businesses, simplifying regulatory frameworks, providing access to credit and financing, and supporting innovation and research and development

Implementing comprehensive economic reforms is vital for efficient delivery of public services and addressing long-neglected social needs. This includes focusing on areas such as nutrition and health services, primary and secondary education, quality enhancement of tertiary education, water supply and sanitation, and urban development. Reforms should aim to improve governance, enhance the effectiveness of public institutions, and ensure equitable access to essential services across the population. By pursuing these policies and investments, countries undergoing demographic transition can maximise the economic benefits and create a sustainable and inclusive growth path. It is crucial to adopt a holistic approach, involving coordination between government, private sector, civil society, and international partners to ensure effective implementation and longterm success.

(The author Shri Avinash Mishra is Adviser, NITI Aayog, and Ms Madhubanti Dutta is Young Professional, NITI Aayog).

Views expressed are personal.