India's Demographic dividend, challenges and opportunities

Demographic dividend of any country is the potential for economic growth derived from a young-ward shift in the age distribution of its population. It occurs when the share of working-age population (15-64 years) increases, while the percentage share of non-working age population decreases.

As number of working-age population in labor force rises, the dependency of elderly decreases on labor force, which leads to economic surplus. For achieving this phase, a country transitions from phase of high fertility/mortality rate to low fertility/mortality rates. During demographic transition, families tend to have fewer children, which allows household resources to be invested in broader range, such as long-term well-being and education.

India stands as the world's largest provider of human resources, contributing approximately 24.3% of the global international workforce. The country is home to around 600 million people aged between 18 to 35 years, with approximately 65% of its population below 35 years old. India's demographic dividend is expected to peak around 2041, and it is estimated to last until 2055-56. Dependency ratio of India is about to reach its lowest point at 31.2% by 2023. India’s overall labor force participation have increased to 42.4% in 2023, compared to 41.3% in 2022. According to the Ministry of Women and Child Development, India’s female labor force participation rate has increased in FY 2022-23 by 4.2% to 37% total. Trend of FLFPR in last five years was as follows: 37%, 32.8%, 32.5%, 30.0%, and 24.5%.

India has become world’s most highly populated country in 2023, with the largest youth workforce. This is both an opportunity and a challenge for India, because young workforce is the driver of economic growth while, if it’s potentials is not channelized properly, it can turn into a national crisis. Three-fourth of India’s workers are engaged in low paying jobs, while around 45% of Indian population rely on agriculture. Around 28% of youth are engaged in unpaid help in household ventures which is ‘disguised unemployment.’

To address this challenge, Bibek Debroy, the Chairperson of the Prime Minister’s Economic Advisory Council, suggested that India needs to create around 5 –8 million jobs per year. Despite the increasing economic growth of the country, there is a lack of quality skilled and formally trained workforce also. As India recently surpassed China as the most populist country in the world, it also dreams to take over as world’s manufacturing hub but these dreams seem challenging due to a dearth of adequate skilling.