Going beyond the feel-good of ‘demographic dividend’

Going beyond the feel-good of ‘demographic dividend’

Prime Minister Narendra Modi has invoked the benefits of the 'demographic dividend' from time-to-time

By setting aside one chapter in the annual Economic Survey, Krishnamurthy V Subramanian, the government's Chief Economic Adviser has redirected spotlight on India's entry into the era, lasting more than two decades, when it can harness its “demographic dividend”. This has been followed by a plethora of media reports, many of which give the impression that India being able to secure this advantage like other Asian nations – chiefly Japan, China and South Korea – is a given and there is little which has to be done to push growth because this would happen on its own steam.

This belief is based on the conjecture that because the share of the country's working population in the age band of 20-59 years will outmatch those in the 0-19 age group, that Indian economy will grow. This demographic group it is believed will prosper by their own initiative. The government repeatedly declares that its growth philosophy is grounded in the belief that entrepreneurship and innovation will be the hallmark of the Indians in the working-age band. Because there will be greater number of people who will perforce have to find ways to make a living, and thereby contribute to national growth, Indian economy will prosper, goes the rather convoluted argument.

Away from policy-talk, ‘demographic dividend’ has also been used as assurance by the politically class, chiefly Prime Minister Narendra Modi. Master of coinage, he used this phrase liberally during his 2014 electoral campaign. The idea was an additional instance of the freshness he then presented. Critics would like to remind that his May 2013 tweet also urged that Indians should "equally harness longevity dividend, the wisdom of our elders", a spirit he has not actually followed in-house.

Yet, by the repeated mention of the impending boom, Modi has firstly created an impression of the inevitability of high growth and secondly also marked out his space in the political domain as a leader who speaks a vocabulary far advanced compared to his rivals. Whether or not ordinary people actually understood the meaning of 'demographic dividend', the jargon created the impression that he had another rabbit to pull out of his hat.

Challenges aplenty

Simplistically, India has already entered the era when its fertility rates is on the anvil of dipping below the replacement rate – in fact currently, already 13 out of the 22 major states have reached this demographic phase. The direct impact of this phenomenon would be on the working-age population – Subramanian has pegged this to rise from 50.5 per cent of the overall population in 2011, to about 60 per cent in 2041. Additionally, this would result in significant inter-state migration as certain states will age before others and would require workforce from outside. This would necessitate better management of social conflict on the lines of 'son of the soil' versus 'outsiders'.

The increase in the number of the aged, in the 60+ years band, and corresponding decrease in the young population will become visible, significantly among those in the school-going and early college age. While this significant alteration in the demographic distribution of the population would require plans to be drawn with foresight, the principal focus of the political leadership so far has been on tom-toming about potential growth due to the increase in the number of healthy adults.

In any case, with life expectancy already on the upswing over past several decades, and slated to rise further, with advancement in health technology and improvement in quality of living standards, the number of aged in the country will also rise significantly and these have been elaborated at length in the Economic Survey. Changes in India's demographic profile will chiefly necessitate significant policy reorientation to make India's youth entering the working age being ready for it.

Additionally, a fresh approach is required in the fields of school education, health care and retirement policy. With the decline in 0-19 years population, the number of people entering the work force will gradually begin to decline and the 'demographic midriff' will bulge initially and this would be followed by, although several decades later, by the gradual increase in the median age of society. This phenomenon is being witnessed in all countries which entered the period of demographic dividend being available several decades ago and are now 'ageing societies'.

These countries include nations like Japan, Spain and Italy and several others, including United States, China, Thailand and Brazil. India can learn from their challenges where increase in mean age has been accompanied by reduced consumption as older people already own most of what is required. There is also a greater emphasis to be more close-fisted because of the limited resources available. Government will have to play greater attention to growing need for pension as family support will be available in decline.

Moreover, India cannot just bask in the assurance that the number of its 'wealth creators’ is going to swell over the next three decades. Greater thought is required to conceive policy to create avenues and means for this energetic demographic group to achieve relative prosperity if not the secure abundance of affluence.

Changing policy priorities

On the education front, because the number of school-going children, especially those in the primary level initially, is going to drop, planners will be required to often formulate out-of-the-box ideas, including merger of these schools. This would become necessary over the next two decades as there will be a dramatic decline in the number of fresh enrolments in primary school. This would mean fewer schools and lesser jobs for teachers.

On the other hand, because schools will stop being virtually at the doorstep, measures will have to improve road connectivity and improving security as children are most vulnerable to criminal elements. Without burdening readers with demographic details, if the emphasis so far has been on quantity, it has to now shift to quality and this can be done by making schools more 'participative' and less 'instructive'. The approach should be to harness talents of children and not be completely curriculum-driven.

Inadequate expansion of public health facilities is another worry that looms ahead. This will largely also be the result of a paradox that health facilities are better where there will be reduced necessity because, barring the so-called BIMARU states, actual population will begin demonstrating a phased decline in coming decades. Currently, more hospital beds are available in states which have stabilised population growth while the BIMARU states, which are yet to significantly reduce their Total Fertility Rate, have poorer hospital coverage.

Along with the need for more hospital beds in states with higher population growth, there has also got to be a gradual shift in focus towards geriatric health management. Currently, there is very little facility for specific requirements for the care of the aged and the demand for this will rise exponentially.

The government will also have to soon initiate debate on raising the retirement age for two reasons. First, improvement in health status is making Indians in 60+ years more healthy than before. Second, once replacement in specialised work sectors starts declining, there will be a need to 'hold on' to the active and experienced work force. Already, this has been witnessed in areas like higher education and in time more and more sectors will feel the need to increase retirement age.

But most importantly, there is need to create more jobs and not solely depend on entrepreneurial skills of people. It must be factored that although the Modi government initiated the skill development programme, it does not have much to show by way of actual achievement. Modi has repeatedly stated that India has to make a transition from a country of job-seekers to a country of job-givers.

But, the biggest impediment to the entrepreneurial boom is India's regulatory regime. Modi's statement regarding selling pakodas as means of livelihood has drawn both admiration and derision. However, even if the unemployed and unemployable (for lack of training and education) decide to embark on the path showed by Modi, local authorities are going to sooner or later swoop on them.

Indian economy cannot move towards becoming more organised and regularised and simultaneously invite people to enter business atthe entry level, easy availability of Mudra loans notwithstanding. It is fine to gloat over impending demographic dividend and even secure a mandate or two promising a rosy future, but if crucial decisions are not taken with adequate foresight, the dividend instead of accruing to the nation, may lead to a huge deficit for society and the country.

(Nilanjan Mukhopadhyay is a Delhi-based writer and author. His latest book is RSS: Icons Of The Indian Right. He has also written Narendra Modi: The Man, The Times (2013))

The views expressed above are the author’s own. They do not necessarily reflect the views of DH.