Demographic Dividend: Boon OR Bane for India Aparna Shukla Associate Professor Dr. VSIPS, Kanpur Dr. A.K. Tomar HOD, D.S. College, Aligrah Abstract Demographic dividend is an opportunity for India if it grasps it accordingly. There was a major role of DD in economic growth of China. Now a day India is very much aware about this opportunity but there is a need of proper planning and strategy formulation. This paper is an attempt to find and analyse the correlation between economical and social factors with successful DD through various equations. This paper also compares Chinese and Indian DD competencies. Key Words: Demographic Dividend (DD), Per Capita Income, Working Age Population , worker’s Participation Rate, skill Labour. It is true that dramatic declines in fertility throughout much of the world—but especially in East Asia—have produced an initial “demographic dividend.” Many countries with falling fertility have been able to devote more human and financial capital to the market economy rather than to child rearing, thereby enjoying high levels of economic growth. Indian DD: In the near future India will be the largest individual contributor to the global demographic transition. A 2011 IMF
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Demographic Dividend: Boon OR Bane for India
Aparna ShuklaAssociate Professor Dr. VSIPS, Kanpur
Dr. A.K. TomarHOD, D.S. College, Aligrah
Abstract
Demographic dividend is an opportunity for India if it grasps it accordingly. There was a
major role of DD in economic growth of China. Now a day India is very much aware about
this opportunity but there is a need of proper planning and strategy formulation. This paper
is an attempt to find and analyse the correlation between economical and social factors with
successful DD through various equations. This paper also compares Chinese and Indian DD
competencies.
Key Words: Demographic Dividend (DD), Per Capita Income, Working Age Population ,
worker’s Participation Rate, skill Labour.
It is true that dramatic declines in fertility throughout much of the world—but especially in
East Asia—have produced an initial “demographic dividend.” Many countries with falling
fertility have been able to devote more human and financial capital to the market economy
rather than to child rearing, thereby enjoying high levels of economic growth.
Indian DD:
In the near future India will be the largest individual contributor to the global demographic
transition. A 2011 IMF Working Paper found that substantial portion of the growth
experienced by India since the 1980s is attributable to the country’s age structure and
changing demographics. The U.S. Census Bureau predicts that India will surpass China as the
world’s largest country by 2025, with a large proportion of those in the working age category.
Over the next two decades the continuing demographic dividend in India could add about two
percentage points per annum to India’s per capita GDP growth.
No country is better poised to take advantage of the demographic dividend than India In
2020, the average age in India will be only 29 years, compared with 37 in China and the
United States, 45 in western Europe, and 48 in Japan. Moreover, 70 percent of Indians will be
of working age in 2025, up from 61 percent now. Also by 2025, the proportion of children
younger than 15 will fall to 23 percent of India’s total population, from 34 percent today,
while the share of people older than 65 will remain around just 5 percent.
Demographic Dividend of India & China
Contribution of DD in china’s
growth: Research conducted by Wang
and an economist indicates that at least
15% of the economic growth in China
between 1982 and 2000 was a result of
demographic dividend. After 2000,
China's demographic dividend has
declined and is reaching its end,
accounting for only 20% of its previous
contribution to China's economic
growth before 2000.
Like many developing
countries at present, India will
have a relatively large working-
age population (aged between
15 and 59 years), as compared
to its dependent population
(aged 0-14 and 60+) over the
next few decades. This ‘youth
bulge’ will reach its peak in the
year 2035. Analysts consider
this period of a ‘youth bulge’ to
be a boom, during which the
abundance of human capital can
be used to fuel the growth of
the country.
Is India ready to grasp the opportunity of DD ???????????????????????????????
The following economical and social factors are analysed to know the Indian competency for successful DD, they are as,
Growth of the working-age to non-working-age ratio in India, 1950-2050
Non- agricultural GDP 7.71Implied employment elasticity .45Average Real Non- agricultural Wage rate
2.77
Unemployment Rate in India by Age Group
Source: Using NSS Employment and Unemployment Survey unit record data
The unemployment rate by year interval age groups shows that it is the highest among the younger cohorts especially 15 to 24 years age cohorts. In other words, the incidence or instances of those who are willing to work and available for the labour market but unable to find the work or employment is higher among the young (below 30 years) when compared to their seniors (30 + age). It is highest among the 20 to 25 years age cohorts. The situation of young jobseekers in comparison to adults seems to be hard.
Projected Sector wise Employment Status in India
From the above given table and
chart it is clear that there is a
increase in employment rate in
agriculture sector . Dependency on
this sector is high but contribution
to GDP is low. It is clear from the
given figure that employment in
agriculture sector should decline
and more participation should in
other sectors.
Work Participation Rate (WPR) in India by Age Group
member of the working-age population, z , as where z* is the steady-state level of income per worker and z0 is the initial level of income
per worker. λ is the speed of convergence to the steady state, which may depend on factors
such as life expectancy, educational attainment, and the capital stock.
According to the Population
Reference Bureau's 2007World
Data Sheets, life expectancy at
birth for Indians is between 60
and 64years. This was also
confirmed by the most recent
Census of India in 2001. From
the given chart it is clear that
there is admirable improvement
in Indian life expectancy since
1960 to 2007.
According to previous research
the economic growth depends
upon availability of quality
working population which is
ample in India.
The above given equation is again very much proved in Indian context because life
expectancy and literacy rate is increasing in India is increasing which is resulting in improved
numbers of skilled work force and ultimately more economical growth for a country.
Conclusion: The above analysis showes that there is positive relationship between
favourable economical and social factors and successful DD and also the positive correlation
between the life expectancy and per capita income to working population. The lesson here is
that nations wishing to enjoy robust economic growth and viable welfare states over the long-
term must maintain fertility rates high enough to avoid shrinking workforces and rapidly
aging populations. A recent Rand report noted, for instance, that “India will have more
favourable demographics than China” in the long-term, insofar as its workforce is predicted
to grow, not shrink, over the next few decades (see below).1 Indeed, the report suggests that
.Z = λ ( Z*- Z0)
in this century, India may be able to turn this demographic advantage into higher economic
growth rates than even China has enjoyed but the thing is to mould it positively
References:
David Bloom argues, for instance, that more than 25 percent of the per capita GDP
growth associated with the East Asian “economic miracle” of the late twentieth
century can be attributed to the fact that the total fertility rate in East Asia fell from
about six children per woman in 1950 to less than two today.
As Phillip Longman and his colleagues point out in The Empty Cradle, on current
course, countries like China and Japan are poised to see their workforces shrink by
more than 20 percent between now and 2050 because of persistently low fertility,
even as their elderly populations surge.
Bosworth and Collins (2008) use a simple growth accounting framework to compare
the recent economic performance of China and India, and produce estimates of the
contribution of labor, capital, education, and total factor productivity (TFP) for
individual sectors and the economy as a whole.
Nicholas Eberstadt (2010) considers the implications of demographic change in Asia
for the evolving cross-country strategic balance, noting that economic strength has a
major effect on military strength. He finds that China’s forthcoming demographic
changes are likely to pose a barrier to its continued rise, whereas he sees a moderate
boost to India’s strength because of its demographic picture.
Bloom et al. (2010) study economic growth in China and India between 1965-70 and
1995-2000 and find that increases in the working age population share during that
period boosted the rate of economic growth in India by an annual average of 0.7
percentage points.
Yong Wang and Kamhon Kan.Examining projected changes in the size of the labor
force in China and India provides a straightforward way of considering the interaction
of population growth, changing age structure, and the supply of labor.
David E. Bloom Harvard School of Public HealthJanuary 2011, Population Dynamics
in India andImplications for Economic Growth
Web References :http://sustaindemographicdividend.org/articles/the-sustainable-demographichttp://business.mapsofindia.com/india-economy/india-vs-china.htmlhttp://www.policyproject.com/pubs/generalreport/Demo_Div.pdfhttp://www.strategy-business.com/article/10205?gko=93fafhttp://planningcommission.nic.in/data/datatable/0904/tab_57.pdf