Presentation Dev Final

8/3/2019 Presentation Dev Final

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Demographic DividendMeaning and implications: India


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What is demographic dividend ?

The demographic dividend is a rise in the rate of economicgrowth due to a rising share of working age people as a

proportion of the overall population

A demographic dividend does not mean people, but productivepeople

This usually occurs late in the demographic transition when

the fertility rate falls and the youth dependency rate declines.


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How Does DD Come About ?

Three Stages

STAGE 1

High fertilityrate; decliningmortality rate

Very broadyoung agegroup; below 15

years High

dependency ratio

STAGE 2

Fertility startsdeclining at a fastpace

However, highergrowth rate inthe working age

populationcontinue

Developingcountries oftoday

STAGE 3

Old agepopulationincreases andbecomes higher

Levels sustaineddue to low

mortality rates


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Demographic Change and Economic Growth

contribution of the second stage of the age structure transition

depends on the ability of countries to take full advantage of thisstage in providing gainful employment to the workforce

Increased Saving Rate: low dependency rate and increased life expectancy

Decline in fertility rate: women enter into the labour market during this

stage results in increased economic activity

People invest more on their own health when children are fewer in number,

leading to better productivity and economic benefits

Increased public spending in productive activities due to reduction in public

spending towards health and education: decline in the number of children


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Even though the world has

just discovered it, the Indiagrowth story is not new

It has been going on for 25 years


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What is the Indiastory?

VIDEO


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Indian Perspective

Indias

Population

Increase: just over 1 billion to 1.4 billion

Workingage (15 to59 years)

Proportion: increase from 57.7% to 64.3%: 308 million

Workforcelevels

It is estimated that by about 2025 India will have 25% of theworlds total workforce

Beyond2025

Numbers of the aged will begin to increase dramatically,consequently the window of opportunity is between now and2025


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India 2011 (U.S. Census bureau)


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Population growth is slowing

Sources: 1900-1990: Angus Maddison (1995), Monitoring theWorld Economy, 1990-2000:Census of India (2001)

1.0

2.22.1

1.8

1.5

0

0.5

1.0

1.5

2.0

2.5

1901-1950 1951-1980 1981-1990 1991-2000 2001-2010

(%)


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Rising GDP growth

1.0

3.5

6.0

8.0

Average annual GDP growth

0

2

4

6

8

10

1900-1950 1950-1980 1980-2002 2002-2006

(%)


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Literacy is rising

Source: Census of India (2001)

17

52

65

80

0

20

40

60

80

100

1950 1990 2000 2010 (proj)

(%)


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Middle class is exploding

Source: The Consuming Class, National Council of Applied Economic Research, 2002

65

220

368

8%22% 32%

0

100

200

300

400

1980 2000 2010 (proj)

(m)


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Poverty is declining

46

26

16

1% of the people havebeen crossing povertyline each year for 25

years

Equals ~ 200m

0

10

20

30

40

50

1980 2000 2010 (proj)

(%)


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Per capita income

2,1003,050

5,800

16,800

37,000

On a ppp basis

2000 2005 2020 2040 2066

0

10

20

30

40

($000)


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India is now the 4th largest economy

It will overtake Japanbetween 2012 and 2014

to become the 3rd largest


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India has a vibrant private space

100 Indian Companies have market cap of US$ 1bn

1,000 Indian Companies have received foreign

institutional investment

125 Fortune 500 companiesh

ave R&D bases in India 390 Fortune 500 companies have outsourced software

development to India

2% bad loans in Indian banks (v~20% in China)

80% credit goes to private sector (v~10% in Ch

ina)


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Looking forward

7%-8% economic growth

Democracy will not permit more than 8%

1.5% population growth


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Indias demographic advantagemeans that its high growth will

continue longer term whileChina will slow

The India vs. China Debate


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The Economist (August 2127, 2010)

As recently as the early 1990s, India was as rich [as

China], in terms of national income per head. China

then hurtled so far ahead that it seemed India could

never catch up. But Indias long term prospects now

look stronger. While China is about to see its working

age population shrink, India is enjoying the sort of

bulge in manpower which brought sustained booms

elsewhere in Asia. It is no longer inconceivable that

its growth could outpace Chinas for a considerabletime.


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Population Pyramids: India vs China


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Developing Countries: Tracking The Bulge


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Demographic Dividend : India

Opportunity

Increase in the GDP

More per capita income

Reduction in Poverty Public Private Partnerships

Strong economy to faceexternal fluctuations

Challenge

Huge infrastructurerequired to support the

bulge Creation of more and more

jobs

Education and skillimparting institutions


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Factors Affecting the realization

DDRealized

Ecosystem(Ensure High Growth

&

Labour Transitions)

Employability(Enable Quality,

Skills &VocationalTraining

for entireWorkforce

Matching

Institutions

(Build Institutions

that match

Demand and Supply)

LabourLaw

andRegulation

(ProtectEmployee

&

EnableEmployment)


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LabourLaw and RegulationA good regulatory and legal regime should govern the

labour and employment markets in India

Laws should be harmonious with each other and easy to

implement to ensure low cost transactions in the labormarket

Two pronged effort is required for this:

for markets to work properly employees need to be protectedagainst exploitation and poor working conditions

The legal framework should not be biased against the normal

employment generating businesses. This would generate greater

employment


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Employment Ecosystem

A conducive ecosystem ensures that the that growth is

sustained and spread across the country, thereby

generating employment opportunities for all

A good employment ecosystem that would facilitate, ifnot accelerate four transitions:

Rural to urban migration

Farm to non-farm switching

Movement from unorganized to organized sector

Transfer from subsistence self employment to quality wage

employment


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Government Schemes

Aims at enhancing the livelihood security ofpeople in rural areas

Guarantees hundred days of wage-employmentin a financial year to a rural household

The MahatmaGandhi National

Rural EmploymentGuarantee Act

Sub-Mission for Urban Infrastructure andGovernance

Sub-Mission for Basic Services to the Urban Poor

The JawaharlalNehru NationalUrban Renewal

Mission

It is a programme to build rural infrastructure

Employs a large part of rural population

Bharat Nirmanprogramme


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Employability

New entrants in the job market need to beemployable for the new opportunities that growth

will throw up

Availability of Good and accessible educational and

vocational training system

Initiatives in the past

Increase in number & quality of Industrial Training

Institutions (

IT

Is)

Skills Development Initiative of CII


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Employability

New entrants in the job market need to beemployable for the new opportunities that growth

will throw up

Availability of Good and accessible educational and

vocational training system

Initiatives in the past

Increase in number ofIndustrial Training Institutions (ITIs)

Skills Development Initiative of CII


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Education System

Is reasonably good for the top 20%

Highly competitive business and

engineering institutions

Is abysmal for the rest

1 in 4 teachers is absent in government

primary schools

54% of children in urban India in private school


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Indias Three Mismatches

THE GEOGRAPHIC MISMATCH:

Much ofIndias demographic dividend will occur in states with

backward labor market ecosystems.

Between 2010 and 2020, the states of UP, Bihar and MP willaccount for 40% of the increase in 15-59 year olds but only 10%

of the increase in income.

During the same period, Maharashtra, Gujarat, TN and Andhrawill account for 45% of the increase in GDP but less than 20% of

the addition to the total workforce.


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THE SKILLS / EDUCATION MISMATCH:

About 89% of the 15-59 year olds have had no vocational

training.

Of the 11% who received vocational training, only 1.3%

received formal vocational training.

The current training capacity is a fraction of the 12.8 millionnew entrants into the workforce every year.


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THE SECTORAL MISMATCH:

Most employment opportunities will arise in sectors where

people have little experience.

The largest component of labour force growth is in rural

areas but the most growth in employment is in areas that

require greater human capital.

Wage inflation projection till 2026 flag skill shortages.


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References

Sources of growth inIndian Economy by Bosworth, Collinsand Arvind at Indian Policy Forum, New Delhi

Fostering Inclusive Growth via Demographic Dividend by

Fabrice Lehmann, December, 2009

Indias Development by Raghuram G. Rajan, University of

Chicago

Imagining India, Nandan Nilekani

http://nrega.nic.in/netnrega/home.aspx

http://imaginingindia.com/explore-and-discuss-the-

book/explore-the-chapters/ideas-that-have-arrived/indias-

demographic-dividend/

http://www.youtube.com/watch?v=qiOFnkYf7zc

http://www.youtube.com/watch?v=-rqlKyJ3xbM


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