India's Population Surge: Dividend or Disaster?

Report that India will surpass China in population in 2023 may be a time bomb

Jul 28

By: Neeta Lal

The long-awaited report that India will surpass China as the world’s most populous country in 2023 has triggered debate in India, with the ruling right-wing Bhartiya Janata Party government predicting a `demographic dividend’ and with economists increasingly concerned that rampant population growth is more a cause for alarm if there aren’t sustainable policies in place to harness the dividend.

Currently, an estimated 20-25 million Indians enter the workforce annually with only 7 million finding a secured job. More than 15 percent of youth are unemployed today with a full third of those neither in employment, education nor training – the highest in the world. While we still have a young population, they are either unemployable or there are just not enough jobs for them.

The forecast of India’s arrival at the population apex, contained in the 27th edition of the United Nations’ World Population Prospects 2022, has been expected for years as China’s draconian population limitation policies, followed by intensive urbanization, cut sharply into its total fertility quotient. Thus Asia’s third largest economy, now numbering 1.4 billion, will become the world’s most populous country as early as next year with a projected total population of 1.5 billion by 2030 and 1.66 billion by 2050, the UN said.

Commerce Minister Piyush Goyal exulted that “the youth of the country” will provide India with an enormous "demographic dividend," defined as a period when the share of the working-age population is larger than the non-working-age share, with these workers entering the workforce, earning and spending to help the economy to grow at a faster pace. PM Narendra Modi was quick to assert at a virtual event that India’s youth present a “massive opportunity” for the country.

But according to a recent Confederation of Indian Industry report, India’s demographic dividend will become a liability if the economy doesn’t produce enough jobs. India is expected to add another 183 million to the working age group of 15-64 years between 2020-50. The report warns that there is an acute shortage of time and that India's working age population is necessary but not sufficient for it to sustain economic growth.

The report highlights how the skills mismatch and shortage can impact productivity growth. “The demographic dividend is supposed to catapult the Indian economy into the orbit of developed countries,” said Pritha Sen, a professor at the Center for Economic Studies and Planning at Jawaharlal University, New Delhi. “However, the country’s burgeoning population also poses enormous challenges in effectively addressing core problems of poverty, hunger, malnutrition, better quality of health, education, as well as physical infrastructure to make cities, towns, and villages livable. So unless we invest substantially in education and skill development of youth, we may be heading for a demographic `disaster” rather than dividend.”

Indian demography has already become a ”paradox,” experts say, offsetting any immediate or clear dividend benefits. Northern and eastern India are nowhere near fertility replacement levels, while southern India is gripped by a new crisis of ageing population and western India is fast reaching the southern level.

“This has led to the twin crisis of too many young people and too many old people concentrated in different geographies of the country simultaneously, wrote Akhileshwar Sahay, an urban transport infrastructure expert for News18. “Different types of solutions have to be devised for different parts of India and it is getting late.”

India theoretically could have a golden period in the two decades of 2020 to 2040, if the demographic dividend is harnessed properly. However, as experts point out, that doesn’t mean it will happen automatically. With only an astonishing 3 percent of the workforce with any formal vocational training as per CII, India cannot hope to increase productivity nor it cannot hope that young people will be in high-quality gainful employment. Poor schooling and training, social unrest, a deepening communal divide, and rising majoritarianism are just some of the factors affecting the investment climate and employment opportunities.

The 2011 Census put 58.3 percent of the population below the age of 29, falling to 52.9 percent in 2021 and is projected to decline further to 42.9 percent by 2036. Be that as it may, the government’s think-tank, Niti Aayog, projects that India’s gig economy and platform workers will provide substantial employment in the next 10 years, with as many as 90 million people to be absorbed by the gig economy. The ‘New Age Workforce,’ it says, will find employment in construction, manufacturing, retail, logistics, and transportation.

However, critics point out that this workforce will likely be underemployed and that their jobs would come with low wages, no social security, insurance or medical facilities, and with little or no future prospects. The loss of salaried jobs in June 2022 alone, said the Center for Monitoring Indian Economy, was about 2.5 million. While daily wage earners were the worst hit, CMIE data shows that under 36 percent of the working age population was employed in June 2022. Of the 13 million people who become part of India’s workforce each year, according to the World Economic Forum, only one in four are management professionals, one in five are engineers, and one in 10 graduates are employable.

Experts say that India is often touted as the next big economic growth story after China because of its relatively younger population. However, in the absence of conducive economic, social and political conditions, India risks squandering its advantage by “creating a young and angry population, and with it conditions for social unrest and economic disaster,” investment bank Espirito Santo warned back in 2013. There is little promising to change that.

Gender disparity is another big challenge. In both urban and rural pockets, cultural barriers and safety concerns are major bottlenecks to women’s educational and professional development. Those who do enter the workforce constantly battle biases during recruitment and in the workplace.

UNICEF, in 2019, reported that at least 47% of Indian youth will not possess the education and skills necessary for employment by 2030. While over 95% of India’s children attend primary school, the National Family Health Surveys confirm that poor public education infrastructure and teacher training, plus malnutrition have ensured poor learning outcomes.

To put it in global context, the proportion of formally skilled workers as a percentage of total workforce stands at 24 percent in China, 52 percent in the US, 68 percent in UK, and 80 percent in Japan, against an abysmal 3 percent in India.

Given these staggering odds, Sen advocates that, in addition to government initiatives, corporate investment in employee education and training will play a critical role in meeting the demand for high-skilled workers.

“Only with all stakeholders on board including greater government-industry synergy, high-quality school education, relevant higher education, and skill development can India hope to reap its much-touted demographic dividend," Sen concluded.