Unleasing India's Demographic Dividend for Economic Prosperity

Unleashing India's Demographic Dividend for Economic Prosperity

India possesses a demographic dividend that holds tremendous potential for driving robust economic growth. To capitalize on this opportunity, it is imperative to empower the workforce with the essential skills required to meet the demands of the global economy.

Recent UN data has revealed that India has surpassed China to become the world's most populous country. The discourse on population growth and economic development has been a recurring topic among economists since the 19th century. Thomas Malthus famously argued that a burgeoning population would inevitably lead to diminished living standards due to limited resource availability, potentially resulting in strife and famine. Fortunately, history has proven this theory wrong. Malthus failed to account for the power of human ingenuity, innovation, and technological advancements, which have continually improved productivity and resource utilization over time. In the 1970s, developing nations viewed population growth as a significant obstacle to economic development and implemented measures to curtail it. However, subsequent experiences in South East Asian countries like South Korea and Thailand demonstrated the economic benefits of demographic shifts and a higher proportion of working-age population (15-59 years). This phenomenon, known as the demographic dividend, facilitated their transition from agrarian to industrialized economies. Today, it is widely acknowledged that population growth has a direct impact on economic growth, prompting countries like the United States to adopt immigration policies aimed at enhancing their human resources' quality.

Nonetheless, reaping the benefits of the demographic dividend requires proactive efforts and does not occur automatically. The economic advantages primarily stem from the belief that during the period of a youth bulge, the workforce's proportion of young individuals surpasses the dependent population. This leads to increased productive capacity, domestic demand, and consumption. Unfortunately, India lags behind other Asian nations in terms of both private and public investments in nutrition, health, and education for children and adolescents. Addressing this shortfall necessitates parallel investments in human capital alongside physical capital expenditures. However, focusing solely on capacity building through social sector investments will not suffice unless complemented by economic policies that foster growth and entrepreneurship.

According to the India Skill Report 2023, only 50% of the youth are currently employable, although this figure is gradually increasing compared to previous years. Policymakers have recognized the importance of improving the quality of the workforce and have implemented initiatives such as Skill India and the new education policy. However, enhancing employability remains an ongoing process.

One critical area requiring attention is the learning loss resulting from the recent pandemic. The Annual Status of Education Report (ASER) survey confirms the extent of learning setbacks due to prolonged school closures. The survey reveals a decline in arithmetic and literacy abilities among children compared to pre-pandemic years. For instance, the percentage of Class 3 students in both government and private schools who could read at a level appropriate for second graders fell from 27.3% in 2018 to 20.5% in 2022, reaching the lowest level since 2012. Additionally, the proportion of third graders who could solve math problems meant for second graders dropped to 25.9% from 28.2%, hitting the lowest point since 2016. Such learning setbacks can have long-term repercussions on future productivity, earning potential, and foundational knowledge. Remedial classes and support systems for students should be considered as policy measures to bridge these learning gaps. The Tamil Nadu government's 'Illam Thedi Kalvi' scheme, designed to address learning gaps, stands as a replicable model for other states. Similarly, vocational education is of equal importance to academic education as it creates employment opportunities for a large number of Indian youth. Offering quality vocational education, facilitated by skilled trainers, has the potential to cultivate a young and efficient workforce while generating self-employment opportunities