Reaping the demographic dividend

India needs to invest in quality school and higher education as well as healthcare

August 04, 2022 12:25 am | Updated 12:58 am IST

A crowded wholesale market on Avenue Road in Bengaluru on July 11, 2022.

A crowded wholesale market on Avenue Road in Bengaluru on July 11, 2022. | Photo Credit: PTI

The UN report, World Population Prospects 2022, forecasts that the world’s population will touch eight billion this year and rise to 9.8 billion in 2050. What is of immediate interest to India is that its population will surpass China’s by 2023 and continue to surge.

A long-time critic of China’s population policy and author of Big Country with An Empty Nest, Yi Fuxian, believes that without its one child policy, China’s population, too, would have naturally risen and peaked at 1.6 billion in 2040, allowing the world’s second-largest economy to enjoy a much longer “demographic dividend.” Instead, China is enduring an ongoing population implosion, which by 2050, will leave it with only 1.3 billion people, of whom 500 million will be past the age of 60. India’s population, by contrast, would have peaked at 1.7 billion, of whom only 330 million will be 60 years or older.

Simply put, India is getting a demographic dividend that will last nearly 30 years. How it handles this windfall will determine if it will rise to the top of the economic league table by the end of this century or continue to eddy at lower middle-income levels. A sceptical world is watching.

India’s potential workforce

Most optimistic about India’s future rise are major consulting firms. Deloitte’s Deloitte Insights (September 2017) expects “India’s potential workforce to rise from 885 million to “1.08 billion people over the next two decades from today”, and “remain above a billion people for half a century,” betting that “these new workers will be much better trained and educated,” than their existing counterparts. It contends that “the next 50 years will, therefore, be an Indian summer that redraws the face of global economic power.”

McKinsey & Company’s report, ‘India at Turning Point’ (August 2020), believes the “trends such as digitisation and automation, shifting supply chains, urbanisation, rising incomes and demographic shifts, and a greater focus on sustainability, health, and safety are accelerating” to “create $2.5 trillion of economic value in 2030 and support 112 million jobs, or about 30% of the non-farm workforce in 2030.”

The Economist is optimistic about India’s future too. In its May 14, 2022 issue, it had this to say about India, “As the pandemic recedes, four pillars are clearly visible that will support growth in the next decade; the forging of a single national market, an expansion of industry owing to the renewable-energy shift and a move in supply chains away from China, continued pre-eminence in IT, and a high-tech welfare safety-net for the hundreds of millions left behind by all this.” But not all are so bullish about India.

The Financial Times in an article, ‘Demographics: Indian workers are not ready to seize the baton’, believes that India’s bad infrastructure and poorly skilled workforce will impede its growth.

RAND Corporation’s report, ‘China and India, 2025, A Comparative Assessment,’ commissioned by the U.S. Secretary of Defense endorses this view as does the 2018 report, ‘An Indian Economic Strategy to 2035’, released by the Australian government and another on India from the Organisation for Economic Co-operation and Development (OECD) titled, “Going for Growth’‘. Their pessimism may be overstated and even outdated today. It is possible that McKinsey & Company and Deloitte are seeing something many others are missing out on.

‘India: an open society’

There is so much going on for India today compared to China, the only country it can be reasonably compared to. It is still a young country and in a much better position to transform itself compared to China of the 1970s. It is still an open society where mass protest matters and produces results. Indians have not been traumatised as Chinese were at the time of Mao Zedong’s death and in the aftermath of two events he set off and which roiled China for decades — The Great Leap Forward and the Cultural Revolution.

The IT technologies now available in India, and most importantly the Internet they run on have matured exponentially. Many things right from video conferencing to instantaneous payments and satellite imaging are getting better and cheaper by the day.

Thanks to the COVID-19 pandemic, we know these can revolutionise learning and transform Indian society at an astonishingly low cost, unimaginable through much of China’s economic liberalisation.

Creaky and inadequate as they are, India’s administrative systems manage to deliver and its infrastructure is in far better shape today than it was for China at the start of its reforms. Nor did India impose the equivalent of China’s one child policy that has seen China suffer the consequences of a prematurely ageing society with a skewed gender ratio.

Deep divide in China

India does not have a Hukou system which in China tethers rural folk to rural parts creating a deep divide between a small and prosperous urban China and a much larger, very deprived rural China about which the world knows so little about.

As Scott Rozelle at Stanford University’s Centre on China’s Economy and Institutions, writes in his book co-authored with Natalie Hell, Invisible China - How the Urban Rural Divide Threatens China’s Rise, “Thanks to the Hukou system disincentivising migration to urban areas, only about 36% of China’s overall population is urban and fully 64% is rural (some 800 to 900 million people).” The huge divide between urban and rural China is, according to Rozelle, almost unbridgeable.

To wring the best out of its demographic dividend, India needs to invest massively in quality school and higher education as well as healthcare — sectors it has neglected for decades — across India on an unprecedented scale, literally in trillions of rupees between now and 2050 when it would have reached the apogee of its population growth.

India must seize the moment and not be incremental in its approach. Given the will it can initiate and see through a transformation that will stun the world, even more than China’s has so far.

Uday Balakrishnan teaches Public Policy and Contemporary history at The Indian Institute of Science, Bengaluru. Views expressed are personal

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