Economic Advantages of Demographic Dividend: The Case for India

Population growth can serve both as an impediment and stimulus to growth and development of an economy. A rapid population growth impacts economic development of a nation when the population grows faster than the Gross National Product. Demographic Dividend is rise in the rate of economic growth due to rise in the share of working age population in the total population. The demographic transition process has three unique age structures for any country. In the first phase, fertility is high and mortality is declining, resulting in large numbers in the young age group with a high dependency ratio. The second phase is marked by declining fertility rates. However, due to the earlier phase of higher fertility rates, working age population continues to grow. In the last phase, proportion of old age population is higher resulting in a high dependency ratio. Demographic dividend occurs in the second phase of demographic transition. The economic benefits from age structure change can be obtained by providing employment opportunities to the growing working age population. This phase also brings number of benefits to the households including increase in savings, number of women likely to increase in the workforce, higher spending on education and health care and economic benefits like improved productivity. Over the last six decades India has undergone rapid demographic changes. In the early decades after independence, the growth rate of total population was higher than the working age population. However, since 1970s the trend has reversed. National Commission’s population census projections, May 2006 report shows that working age population of 15-64 years is likely to increase from 60% in 2001 to 68% by 2026. In terms of absolutefigure, the working population is likely to increase by 338 million by 2026. Such a trend will make India one of the youngest nations in the world. The average age of an Indian by the end of year 2020 will be near 29 years as compared to USA, China and Japan with 45 years, 37 years and 48 years respectively.However, this demographic dividend will lead to progress only if the population remains healthy and becomes more educated and skilled. This Research Paper uses the ex-post facto research design to understand the demographic transition in India, to analyse various factors which contribute to demographic dividend and help reap economic benefits arising therefrom.