Demographic Shifts and their influence on the economy - Part 6
Part 6 – India’s
Challenges
Demographic dividend refers to the growth
in an economy that is the result of a change in the age structure of a
country's population. The change in age structure is typically brought on by a
decline in fertility and mortality rates. 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. In essence, there’s a period in nation’s progress
when longevity is increasing and working age population is large in proportion
to the old age population. The median age is low. This is when the nation is
best positioned to move forward.
India has 62.5% of its population in the
age group of 15-59 years which is ever increasing and will be at the peak
around 2036 when it will reach approximately 65%. These population parameters
indicate an availability of demographic dividend in India, which started during
the nineties and will last till around 2050. The demographic dividend needs to
be harnessed. It doesn’t deliver on its own. India’s record in harnessing this
dividend is mixed. A lot has happened, but a lot has been missed. One of the
dangers of missed opportunities is that it can quickly turn into a demographic
curse.
In India, the average life expectancy was just 30 years at birth at the time of independence. It increased by 60% by the time the 1971 census was conducted. Since then it has steadily grown and is estimated to be 70 years at the moment. It was 67 years in 2011, 63 years in 2001, 58 years in 1991, 54 years in 1981, 48 years in 1971, 42 years in 1961, and 32 years in 1951. Increasing life expectancy is a good thing and India has room to improve since most developed countries have a life expectancy in excess of 80.
The current fertility rate in
India is estimated to be 2.2. Over the years it has declined – 5.9 in 1951, 5.9
in 1961, 5.5 in 1971, 4.77 in 1981, 3.96 in 1991, 3.24 in 2001, and 2.51 in
2011. The decline was slow during the first 30 years and has accelerated since
then.
The median age in India is estimated
to be 29 years at present. As is evident from fertility rates and longevity,
this has also increased significantly over the last 70 years. However, high
fertility rates kept it low for a long time. It was 21 years in 1951, 19.3
years in 1971, and 20.2 in 1981. Since then it has started increasing
significantly as fertility rates dropped fast and longevity kept increasing –
21.1 in 1991, 22.7 in 2001, 25.1 in 2011 and 29 years now. It is estimated that
this would increase to 32 by 2031 and 38.5 by 2051. This kind of increase would
lead to a very significant increase in the proportion of the elderly (those
above 65 years of age). It is also evident that the current demographic
dividend of a young population is not forever, and is likely to disappear during
the next two decades.
Regional skew
India is a large country and
aggregate figures do not reflect the full picture. The West and the South are
economically significantly more dynamic. Their social indicators are also
superior.
The West and the South have
low fertility whereas the central part has fertility rates at African levels.
Urbanization is now estimated to be above 50% in most of West and South, but is
below 25% in most of Central India.
India’s challenge is to
create jobs and economic opportunities in the hinterlands. These are heavily
populated and do not have the natural advantages that coastal regions have in
terms of connectivity to international trade. One of the ways in which India is
addressing this is to invest in inland movement infrastructure (examples –
Eastern and Western freight corridors). India also needs to invest in value
added industries/ sectors in the hinterland which can employ people gainfully
and competitively. All of this happening, but not necessarily at the desired
pace. India also needs to invest heavily in skilling.
Although India’s population
will continue to grow for the next 30 years, it will be at an increasingly
slower pace. It is expected to peak at about 1.6 billion by 2050 and then start
declining. The expected decline will be slow to start with and then steep. It
is expected to come down to 1.1 billion by 2100.
It’s also going to age. At
present, already 6.5% of the population is above 65 years of age. This is
likely to increase to 16-17% by 2050, and longevity is also expected to rise to
above 76. Given the sheer size of the population, we are talking about a very
large number of the elderly, of the order of 250 million, by 2050.
Further, most of West and
South is already much older, and not reproducing enough. The phenomenon of
migration has gathered momentum during the last 30 years. There are both
permanent migration and temporary (seasonal) migration happening all the time.
Given the language and cultural differences, this also has a side effect. It
creates social unrest and much of it can be disruptive. It’s evident that India
would be in trouble if it relies purely on natural forces to address these
issues. It would need to make big changes in the labour surplus regions to
harness the resources.
India’s population advantage
By 2028, India’s population
is set to overtake China. It will not start declining till around 2048/49. The
sweet spot is depicted below. India will need to harness all its potential
before the working age population starts declining.
Factually, almost all the
Tiger economies created trained manpower to harness the demographic dividends –
Japan during the fifties and sixties, Korea during the seventies and eighties,
others at around the same time, and China during the eighties and the nineties.
This is an imperative. India needs to address this at very big scale in double
quick time. It’s not that India is in a unique position, though it is certainly
at the most advantageous position. There are countries like Indonesia competing
with us, and there are several competitors emerging in Africa, and in some
sectors Bangladesh is doing extremely well.
The government needs to
address the poor social indicators which are a direct result of underinvestment
in education, public healthcare and infrastructure. These are a prerequisite.
No other country has done it without addressing these issues and India cannot
be an exception.
New cities need to be created
to create the opportunities. India’s urbanization levels were 31% in 2011 and
are expected to have touched 35% now. If we expect India to grow like China, we
are talking about urbanization levels of 55-60% by 2040-2045. In simple terms,
this means that 70-75% more people will live in cities than are living today.
This obviously means creation of many new cities with capacities to house them.
Since most people migrating will be from poorer sections, it again means that a
lot of the new housing created will have to be in the affordable segment, and
each of these new cities will have to have well designed public transport
systems. Further, existing cities will need to upgrade at breakneck speed and
also expand horizontally.
A lot is being done. A lot
more needs to be done. The one constant is that India doesn’t have time to waste
on trivialities and distractions.
Part 1 – The key parameters that influence shifts
Part 2 – What has been the Japanese Experience
Part 3 – Greying and aging before it gets rich
Part 4 – The two dominant economies of the world over the last 150 years
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