Demographic dividend or doom? What awaits India as the world’s most populous nation

On April 19, the United Nations declared India is poised to overtake China as the world’s most populous nation, with almost 3 million more people than its neighbour by the middle of this year.

The United Nations Population Fund’s (UNFPA) ‘State of World Population Report’ said India’s population by mid-year is estimated at 1.4286 billion, against 1.4257 billion for China – 2.9 million fewer.

The UN data has triggered a debate in India over whether this population will be a boon or bane for the Indian economy. While some say, India is headed for a demographic disaster, others say the country is on course to derive demographic dividend.

As per the United Nations Population Fund, demographic dividend is “the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population is larger than the non-working-age share of the population”.
Many in India feel, the population explosion will lead to a fierce contest for resources and increase the gulf between haves and have-nots.

“The present model of development only breeds very sharp inequality which excludes a very large segment of the population from the system itself. As they cannot be productively incorporated, they would only be used as cannon-fodder in civil strife against minorities, migrant ethnic communities, Dalits and other lower castes, and so on. Any demographic dividend in such a scenario could only be wishful thinking,” Delhi University professor Savita Singh, tells The Federal, adding that the population explosion could spell a recipe for disaster.

Dr Baljinder Singh, a medical practitioner and a prominent Left-wing intellectual from Bathinda in Punjab, however, says the growth of the economy won’t be adversely affected by high population, citing the example of China.

But India, if it has to evolve as a civilised country, cannot repeat the draconian ‘one-child’ population control policy followed in China. Hence, the only democratic option left to avert a demographic crisis is to derive maximum demographic dividend by turning the “surplus population” into a highly productive workforce.

However, population experts predict that the Indian population would continue to grow up to 170 crore until 2064 and only then start falling, reaching 100 crore by the end of the century.

Against this backdrop, Prime Minister Narendra Modi has called for making India a developed country by 2047. But turning 100–120 crore people into a highly productive working population comparable to that of the West is a humongous challenge.

Population is the ‘market’

The dominant economic discourse reduces population to a market. Mass consumption is as good an engine of economic growth as tech development. So the mass market has its own allure. India’s attraction for many investors is its huge middle-class market. The size of the middle class varies from 5 crore to 10 crore in different estimates and with respect to different sub-segments. The number of households owning a car in India in 2019-21 was 2 crore (NFHS-5), at one end, and the number of air passengers was 68.96 million in 2020, at the other. This gives an approximate idea about this spread.

A middle class market of similar size needs to be added every couple of years if the whole country is to resemble the developed West in income levels by 2047. There are doubts in many sections over whether this is an achievable target.

The Indian population currently has been estimated at 1.425 billion by the UN. The total working population was 522 million in 2022. The labour force participation rate (number of people who are employed plus the unemployed who are looking for work) in December 2022, based on Census projections, was 41.3 per cent of the population. The National Sample Survey Organisation figure is somewhat higher at 47.9 per cent. The corresponding figure for the US is 62.2 per cent, for China 62.6 per cent, and for Brazil 54.70 per cent.

In other words, in India, more than half the population is excluded from the labour force.

Worse still, the labour force participation of women, just at 29.4 per cent in 2021-22, deprive the labour force of a varied participation.

The total workforce in India (those who are actually working, excluding the unemployed) in 2021-22 was 36.63 per cent. The difference between the labour force and the workforce (i.e., the unemployed looking for work) at 4.67 per cent looks modest at first sight. But the actual post-pandemic unemployment figure rose to 8.11 per cent in April 2023 from the pre-pandemic level of 5.27 per cent in December 2019, according to the Center for Monitoring Indian Economy (CMIE). State-wise, the unemployment rates in December 2022 as per the CMIE figures, were 19.1 per cent in Bihar, 20.8 per cent in Delhi, 37.4 per cent in Haryana, 18 per cent in Jharkhand, and 28.5 per cent in Rajasthan. High unemployment even in some industrial hubs indicates how onerous the challenge of employment generation is. This is a crucial area that needs to be addressed if we are to derive demographic dividend.

Reaping the dividend

To understand how this challenge is currently being addressed and to identify what more the Indian state has to do, The Federal examined the scenario in two sample regions, the Kolar region in Karnataka, a backward agricultural region, and Tiruppur-Erode-Namakkal region in Tamil Nadu, an industrially developed zone.

The Federal spoke to VSS Sastry, who retired as a Canara Bank official in the Kolar district, and R Vidyasagar, who was formerly a Child Protection Specialist at UNICEF and who recently conducted a survey of women and child workers, especially adolescents, in the Tiruppur-Erode-Namakkal region of Tamil Nadu, for the Campaign against Child Labour (CACL).

The first and foremost challenge in the Kolar region is increasing farmers’ income through non-farm development in the rain-fed region. To begin with, Sastry cited the example of cooperative dairy development under Nandini and suggested generalisation of the successful Amul model of Anand, Gujarat in most of the backward districts. This can work wonders in terms of additional subsidiary income for farmers and generate new employment too, he said.

But then, milk consumption has its limits and there should be large enough space for the private sector also. Demographic dividend is inconceivable in the absence of mass entrepreneurship in rural India. What are the examples in this regard? To this question, Sastry says: “True, here in Kolar, we have a good model of the poultry industry. Poultry industry is entirely private but it is decentralised, making it almost similar to a social enterprise. No MNC could make a foray into the poultry industry competing with these decentralised units. As they are highly labour-intensive, they generate huge employment as well.”

This might be true only of informal industries. What about absorbing a large working population in the formal sector — be it manufacturing or services? In this regard, Sastry cited the example of a local transport company set up in Coorg. Since it is a hill district, transportation was highly underdeveloped and even the state-run KSRTC was ready to operate their services only on the main arterial routes. But the plantation economy of the district required that workers should reach the coffee plantations located in the remote areas of the district in time every day.

Some former defense personnel came together and formed an association, pooled some seed money and took some credit support from the government to set up a transport company, which operates mini-bus services in remote areas. The company is highly successful and has set up its own institutes to train drivers and conductors and repair personnel which generated employment for the locals.

While Sastry cited positive experiences, Vidyasagar highlighted the seamy side of the industrial transition. He said, “Our survey in the industrial Erode-Tiruppur-Namakkal region of Tamil Nadu revealed that 30 per cent of the children in the 15-19 age-group are out of school and working. Most of them end up in the informal sector with meagre wages. They hardly have any access to skill development. Added to this is the menace of early marriage of girls, which deprives them of education and employment opportunities. Mudra Scheme has hardly made a difference. Our survey also showed that more than 90 per cent of migrant workers in this region are young people (below 30 years) and they work for very low wages without any occupational safety or social security. Even in formal sector industries, the workers get Rs 10,000 to Rs 12,000 only. Demographic dividend would be meaningless if the additional adolescent population entering the labour force is going to be provided this kind of employment.”

Women, who comprise half the population, constitute only little above one-fourth of the workforce. If India has to draw dividend from this section, it needs to ensure gender equity. Laxmi Murthy, a women’s movement activist and journalist based in Bangalore, told The Federal, “While there is a huge population of young people whose share is yet to peak, India’s geriatric population is also quite big. Women are overburdened with care work. This is one important reason why women are constantly falling out of the workforce. More women can find gainful employment only if this problem is addressed.”

The employment challenge

Nearly 12 million young people join the Indian workforce every year. But the county added only 5.8 million additional jobs in 2022-23. At this rate, a huge demand-supply gap already exists. Decent jobs with reasonably high wages constitute only a tiny fraction of this. The enormity of this challenge can be tackled to some extent if the state comes up with suitable measures.

Nisha Srivastava, who has worked as the head of the Vulnerability Analysis Unit of the United Nations’ World Food Programme and is currently a visiting professor with the Institute for Human Development, New Delhi, suggested what those measures could be.

“The main areas we need to focus on are the following: creation of decent jobs, improving working conditions and earnings of workers, empowering women and providing decent employment, improving education and skills, improving health outcomes, improving democratic governance and reducing inequalities,” Srivastava said.

These measures are essential to avoid a demographic nightmare, she added.