As China, Japan and many other nations face an aging demographic profile, the youth segment of India’s population is growing rapidly, and is projected to continue to do so for the next 30 years. Provided India can act quickly on health, education and employment, this demographic dividend has the potential to inject new dynamism into its flagging economy. Failure to do so, however, will result in demographic disaster.
Today, more than half of India’s population is under the age of 25, with 65 percent of the population under 35. By 2020, India’s average age will be just 29 years, in comparison with 37 in China and the United States, 45 in Western Europe and 48 in Japan.This demographic trend will confer a significant competitive advantage upon India. About a quarter of the global increase in the working age population (ages 15-64) between 2010 and 2040 is projected to occur in India, during which time this segment is set to rise by 5 percent to 69 percent of its total population. Roughly a million people are expected to enter the labor market every month, peaking at 653 million people in 2031. As a result the IMF projects that India’s demographic dividend has the potential to produce an additional 2 percent per capita GDP growth each year for the next twenty years.
However, India’s ability to reap the rewards of its huge demographic advantage is far from guaranteed.The failure of a number of Latin American countries with the same demographic profile as Southeast Asia to achieve similarly impressive economic outcomes is a cautionary tale for India. The key to transforming the demographic dividend into economic growth lies not just in having more people, but having greater numbers of better trained, healthier and more productive people. The relationship here is mutually reinforcing; India must harness the advantage of its youth to fulfill its economic potential, and in turn must generate growth in order to continue to support its growing population. As noted by India's former Minister of Human Resource Development, Kapil Sibal, “it will be a dividend if we empower our young. It will be a disaster if we fail to put in place a policy and framework where they can be empowered.”
At the most basic level, India must focus on improving the overall health and well-being of its children in order to make the most of their immense potential. The Asian Development Bank estimated that 32.7 percent of India's population lives below the poverty line of $1.25 a day (PPP), and India is home to one-third of the world's poor. At 44 deaths per 1,000 live births, India's mortality rate is high. The World Bank notes a direct link between undernourishment and impaired cognitive development, so should India fail to ensure the health and well-being of its children, its future productivity and development will be severely curtailed. With a Human Development Indicators ranking of 134 out of 187 countries, India has a long way to go, and must swiftly invest in developing the potential of its enormous human capital.
Perhaps the most crucial task India faces is equipping its burgeoning youth with education and skills training. According to India’s 2011 Census, India’s literacy rate sits around 74%, with significant variation according to state and gender. In this regard, India’s 2009 Right of Children to Free and Compulsory Education Act is a big step towards guaranteeing a basic education for every child. Since its launch in 2010 India has witnessed some positive results, with 94 percent of children between the ages of 6 and 14 enrolled in school, and steady improvements in terms of facilities such as toilets and drinking water.
Nevertheless, concerns regarding the implementation of the Act persist, with teacher absenteeism and large class sizes in many government schools fuelling the popularity of private institutions. Basic educational indicators across the country have actually deteriorated since the implementation of the Act in 2001, with the proportion of children in Standard V reading at a Standard II level and unable to complete basic arithmetic rising.