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Demographic Dividend (India)

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One of India’s competitive advantages is its demographic dividend. Demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to growth of the economy. According to the United National population research, during the last four decades the countries of Asia and Latin America have been the main beneficiaries of the demographic dividend. Advanced countries of Europe, Japan and USA have an ageing population because of low birth rates and low mortality rates. Neither the least developed countries nor the countries of Africa have as yet experienced favourable demographic conditions according to the research by UN population division. China’s one child policy has reversed the demographic dividend it enjoyed since the mid 1960s according to a World Bank global development report.

Falling birth rates reduce the overall expenditure required to provide basic necessities for the under 14 age group (which is yet to be productive) and increased longevity ensures that a large proportion of the population are within the 15-59 age group (working population). Dependency ratio refers to the proportion of non -working poplation on the working population. In India this ratio is around 0.6 according to the World Bank.

However, reaping the demographic dividend requires focused policy action. A recent UNESCAP survey warns there are no guarantees the "dividend" will automatically translate to economic growth. Countries need to put in place the appropriate "social and economic policies and institutions" to absorb the rapidly growing labour force. Reforms in the health and education sector, financial inclusion and adequate employment opportunities are essential pre-requisites to ensure that India’s young population is truly an asset.

The Planning Commission of India, in its 12th Plan discussions, indicates that while the “demographic dividend” accounts for India having world’s youngest work force with a median age way below that of China and OECD Countries, the global economy is expected to witness a skilled man power shortage to the extent of around 56 million by 2020. Thus, the “demographic dividend” in India needs to be exploited not only to expand the production possibility frontier but also to meet the skilled manpower requirements of in India and abroad. To reap the benefits of “demographic dividend”, the Eleventh Five Year Plan had favored the creation of a comprehensive National Skill Development Mission. Various strategies for the 12th Plan – improved access to quality education, better preventive and curative health care, enhancing skills and faster generation of employment are being finalized to ensure greater productivity of Indian workers.


  3. For a working group report on various aspects of India’s population please see
  4. For a debate on demographic dividend initiated by Kaushik Basu, Chief Economic Adviser see

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