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Demographic dividend: How can India leverage its biggest strength?

GS Paper 1/ 2

Syllabus: Population related issues/ Development and management of social sectors or service


Source: IE

 Context: The next 25 years could be the golden years for the country, provided it makes the best use of its favourable demographic composition.

Demographic dividend: It is the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population is larger than the non-working-age share of the population. (UNFPA)


India’s demographic dividend:

  • India’s average age is 29 years, whereas the average age in US, China, France, Germany and Japan is 38, 38, 42, 45 and 48 years, respectively.
  • Therefore, India is the youngest among the most populous countries in the world.



  • India is now in a phase in which its working-age population is rising and the old-age dependency ratio is coming down.
  • For example, India’s old-age dependency ratio will reach 37% in 2075, whereas the same will be 56% in France, 75% in Japan, 49% in the US, etc.


Success stories:

  • Most developed countries today have been able to make use of their phase of favourable demographics for higher growth and standard of living.
  • China has already set an example of being a superpower by harnessing its demographic dividend from the early Eighties till 2008-2009.
  • Similarly, Japan (between the mid-50s and late 80s), South Korea (from the early 90s till 2015), Malaysia and Singapore have shown consistent growth by engineering structural transformations to utilise their demographic dividend.

What’s behind China’s success? China’s early focus on labour-intensive manufacturing and subsequent structural transformation resulted in an almost 10% annual average growth rate over four decades, which is unprecedented.


Opportunities for India: Most countries are experiencing record low fertility rates (6.77 births per 1,000 people in China) and a shrinking labour force.


What should India do?

  • Focus on quality education and health facilities, skilling, reskilling and up-skilling of the labour force to make them more productive and efficient.
  • Create opportunities for the existing labour force and the new entrants into the labour market by improving their productivity.
  • Shift a major chunk of the 45.5% of the labour force engaged in agriculture with low and negligible labour productivity.
  • Focus on labour-intensive manufacturing such as textiles, toys, footwear, auto components, sports goods and agricultural processing, as most of the labour force has limited education and skill sets.
  • Reap the benefits of sectors (like restaurants, hotels, mining and construction, healthcare and caregiving services) with huge potential.
  • For the manufacturing sector to grow, India needs an accelerated focus on –
    • Infrastructure development to reduce trade and transaction costs,
    • Trade facilitation measures,
    • A better IPR ecosystem,
    • Ease of doing business on the ground, and
    • Further rationalisation of labour laws and the taxation system.
    • MSMEs – the backbone of Indian manufacturing, need support in improving competitiveness, achieving scale, digital infrastructure, technology up-grade and branding to be part of a larger supply chain and the global value chains.


Steps taken:

  • Skill development programmes such as the Jan Shikshan Sansthan, the Pradhan Mantri Kaushal Vikas Yojana and the National Apprenticeship Promotion Scheme are welcome steps.
    • They have increased human resources supply in various sectors during 2017-22.
  • The Vision 2025 (of the MSDE) aims to improve linkages between education and skill, catalyse demand for formal skills and create a high-skilled ecosystem.
  • Ayushman Bharat, Swachh Bharat Mission and PM Bhartiya Janaushadhi Pariyojana have ensured health equity to a great extent.
  • The National Education Policy 2020 gives importance to updating knowledge, ensuring productive employment opportunities and decent/dignified work as listed in the UN SDGs 2030.
  • Samagra Shiksha programme provides inclusive, equitable and quality education at all levels of school education.



  • 93% of the employment in India is absorbed by the unorganised sector, where workers are employed in underpaid jobs.
  • High out-of-pocket expenditure on healthcare, poor quality of education, non-functional schools, reluctant authorities, etc.


Way ahead:

  • Improve the labour force participation by improving the employability of the labour force through large-scale skilling.
  • At the same time, creating employment opportunities for the youth who enter the job market every year.
  • Scale up access and quality health services for the majority of the population.
  • Delivery of quality education up to higher secondary education to all is imperative for making a productive labour force.


Conclusion: India’s biggest strength is its manpower. India can be the source of the labour force for the rest of the world, provided that it accelerates reforms and achieves the desired results of flagship programmes of Skill India, Make in India, Start-up India, etc.


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India as most populous can be more boon than bane