Cashing in on India’s demographic dividend

When the share of the working age population exceeds that of the very young and old, it lands a country in what is known as the demographic dividend zone. According to a recent report by the International Labour Organization (ILO) on the employment situation in India, the country is already in this zone, and will remain here for another decade. According to ILO, the youth population in the country will dip to 23 per cent by 2036, from 27 per cent in 2021. The Economic Survey 2018-19 says that the dividend would peak around 2041 (when the working age population would be 59 per cent of India's population).

This is both good and bad news. For the country, this dividend means millions of more people to work and thus to fuel the economy. But to cash in on this demographic dividend, the country has to provide a similar level of employment. For the demographic dividend to work, the country must provide productive employment to the 7-8 million youths that join the labourforce every year. The country, however, seems to be losing the advantage. India’s youth unemployment rate is unacceptably high. Youths account for nearly 83 per cent of the country’s total unemployed population. Every third young Indian is not pursuing education, or is not employed or has no skill-based training. Over two-fifths of the country’s youths are educated below the secondary level and just 4 per cent have access to vocational training.

Read It’s a demographic disaster

This young population group has been expanding since 2000, coinciding with the rise in youth unemployment. Youth unemployment was 5.7 per cent in 2000 and jumped to 17.5 per cent in 2019, showing an increase of more than 300 per cent. According to the ILO report, “In India, the youth unemployment rate (usual status) was an estimated 12.4% in 2022, which was more than 12 times higher than the adult rate.”

The assumption that education and training can naturally make one eligible for a job is simply not real in India. Unemployment is higher among the educated youths, who account for 66 per cent of the country’s total unemployed people. The more educated one is, the higher is the chance of remaining unemployed. In 2022, the unemployment rate among graduates was around 29 per cent, while for those who cannot read and write, it was just 3.4 per cent.

Read Look back at the decade: Youth unrest

According to the World Bank’s latest “Jobs for Resilience” report on South Asia, the job scarcity in the region, where India is the dominant economy, is driving people to other countries. This report says South Asia records the highest outflow of migrants among the emerging market and developing economy. From 2010 to 2023, the exodus amounted to 2 per cent of the region’s working age population. The World Bank also flags the concern that for the demographic dividend to be realised, the region needs to create more jobs. This means that India has to create jobs at a higher rate than its youth population growth rate. This is not the case now, and going by the timeline of the next decade as the peak of the demographic dividend zone, it certainly is a tough challenge.

Developed countries have long crossed this zone that ensured their economic growth. Currently, they are in the “population ageing” phase and increasingly depend on migrants. The developing and poor countries, including India, account for more than 90 per cent of the world’s young population. But if they cannot generate employment, it is not just a loss of this dividend but also a larger issue of economic stagnancy. Besides, such a large population of young people without productive vocations or engagements will trigger social unrest.

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