World Bank Warns of Squandered Demographic Dividend
Kartavya Desk Staff
#### GS1/GS2/GS3 Paper
Syllabus: Indian Society/ Human Geography/ Social Issues/ Economy: Employment
Source: TH
Context: The World Bank (as per “Jobs for Resilience, South Asia Development Update”) warned that South Asia, including India, is not utilizing its demographic dividend effectively.
What is a Demographic Dividend?
The demographic dividend refers to the economic growth potential that arises from changes in a population’s age structure. It occurs when the proportion of working-age individuals (15-64) in a population is larger than the dependent population (children and elderly), leading to increased productivity and economic growth. India is expected to enjoy this window for 37 years starting in 2018 and up to 2055
Benefits of Demographic Dividend are:
Advantage | Description
Increased Labour Force | A larger workforce boosts economic productivity.
Women’s Workforce Growth | Increased female participation in the workforce, driving economic growth.
Higher Savings Rate | Working-age individuals typically save more, boosting overall savings rates.
Middle-Class Expansion | Demographic dividend fosters the rise of an aspirational middle class, driving economic growth and consumption.
Historical Growth Contribution | In advanced economies, demographic dividends historically contributed up to 15% of overall growth.
Rapid Industrialization and Urbanization | An increased employment-seeking population leads to higher economic activities, driving industrialization and urban growth.
Workforce Expansion | With over 65% of the population in the working age group, India can become a significant global economic powerhouse.
Issues in harnessing demographic dividends (as per the report):
• Jobless Growth: South Asian countries experience jobless growth, with an employment ratio of only 59% in 2023, lower than other emerging economies (~70%). This is exacerbated by exceptionally low shares of women in employment and weak employment trends in non-agricultural sectors.
• Slow Private Investment: Private investment has slowed, and growth is primarily driven by public investment. This imbalance can hinder sustainable economic development and job creation.
• Slowing Global Growth: The region faces challenges due to slowing global growth, which can negatively impact trade, investment, and economic prospects.
• Heightened Risks: Various risks, including geopolitical tensions, climate change, and pandemics, pose additional challenges to harnessing the demographic dividend effectively.
Other challenges include:
• Poor Human Capital Formation: India faces challenges with low employability among graduates and postgraduates, with only 20-30% of engineers finding jobs suited to their skills, highlighting a need for skill development.
• Low Human Development: India ranks poor in the UNDP Human Development Index, indicating lower life expectancy and education levels compared to other developing countries
• Informal Economy: Approximately 216 million people in India, primarily in the agriculture sector, are part of the informal economy, facing lower wages, limited social security, and irregular employment, hindering economic growth and stability.
• Asymmetric Demography: The growth in the working-age population is concentrated in some of India’s poorest states, requiring the creation of meaningful employment opportunities to fully realize the demographic dividend.
• Tilted Sex Ratio and Declining Female Labour Force Participation: India faces challenges with declining female labour force participation rates, hindering the country’s ability to fully utilize its workforce potential and achieve demographic dividend goals.
• Psycho-social issues: India stands 12th on top suicide rates of any There is also a rising issue of drug abuse among youth.
• Fatigue and burnout: Indian youth have been observed to be overworked and fatigued due to rising heat and long working hours.
• Radicalization a combination of these issues has also led youth to be radicalized.
Measures to improve Demographic dividend (as per the World Bank Report)
• Openness to International Trade: Reduce barriers to trade to encourage greater participation in global markets, promoting economic growth and job creation.
• Flexible Labour Laws and Efficient Land Markets: Develop flexible labour laws and efficient land markets to enhance business competitiveness, attract investment, and stimulate job growth.
• Infrastructure Investment: Invest in infrastructure, particularly in transportation and agricultural sectors, to improve connectivity, productivity, and competitiveness, fostering economic development and employment opportunities.
• Promote Female Labor Force Participation: Encourage female labour force participation through measures such as wage subsidies, tax benefits, and initiatives to support work-life balance, ensuring gender equality and maximizing the workforce potential.
• Enhance Human Capital: Improve human capital through education and skill development programs, facilitating the transition of workers from agriculture to non-agriculture sectors, thus boosting productivity and enabling economic diversification.
Other measures needed are:
• Boost health investments: Increase healthcare spending to ensure a productive workforce.
• Reform the informal sector: Simplify regulations and provide credit access.
• Invest in the latest technologies: Support research and development in emerging fields.
• Address state diversity: Collaborate between states to manage demographic transition.
• Establish a high-level task force: Create a dedicated team to oversee demographic dividend.
• Manage urbanization: Plan for the influx of young people into urban areas with adequate amenities and services.
• Social security: As per ILO, only 4 per cent of Indians, even fewer than Bangladesh (28.4 per cent), are under any sort of social protection benefit. So, social security net- Insurance and pension needs to be enhanced.
Conclusion:
MoSPI has released the ‘Youth in India 2022’ Report, which shows that the population share of the youth is starting to decline whereas the share of the elderly is expected to increase during 2021-2036. This means necessary steps on the economic side and others are needed to empower the youth to prevent the demographic dividend from turning into a demographic disaster.
Insta Links
• Fertility rate below replacement level