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India’s Demographic Dividend: Asset or Liability?
Half a century ago, there was only one answer to the question of India’s
growing population. In a 1967 book titled Famine 1975!: America’s Decision:
Who Will Survive?, U.S. economists William and Paul Paddock even
advocated that the population of India should be allowed to starve as the
country was a hopeless case. America should allocate its aid dollars to other
countries with greater chances of being able to feed their hungry, the authors
argued.
Ten years ago, the India’s growing masses — the population officially crossed
one billion in 2000 with the birth of Aastha Arora on May 10 of that year
were still considered a liability by many. Providing basic needs for all seemed
to be a near-impossible task.
Somewhere along the line, however, economists discovered a silver lining: The
world was aging, but India was growing younger. There was a “demographic
dividend” that the country could hope for, and ultimately exploit. Ann April
2012 International Monetary Fund (IMF) paper titled, “Asia and the Pacific:
Managing Spillovers and Advancing Economic Rebalancing,” noted that “in
many Asian countries, aging populations are now causing, or are about to
cause, a decline in the working-age ratio. The Japanese workforce has been
shrinking since 1995, and the Korean workforce will start to decline beginning
2015. China’s working-age ratio will peak in 2013 and then decline by a
substantial amount in the next few decades…. The second most populous
country in the region (and the world) affords grounds for cautious optimism.
India’s demographic transition is presently well underway, and the age
structure of the population there is likely to evolve favorably over the next two
to three decades.” The democratic dividend could add 2 percentage points to
per capita GDP growth per annum, according to the IMF.
There are some challenges related to those seemingly favorable demographics,
however. The first is in finding jobs for all these people. Second, and more
importantly, India’s young people will need to develop the right skills for the
modern job market.

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Different Views on Job Growth
Opinions on future job growth diverged at the recent 20
th
Anniversary
Symposium of the University of Pennsylvania’s Center for the Advanced Study
of India. During a panel discussion titled, “Building an Inclusive India,” one
speaker envisioned the country exporting armies of skilled labor to the world.
Another worried about a generation of unskilled Indian workers left behind.
“Only 5% of India’s labor force is estimated to have had any formal training,”
said panelist S. Ramadorai, vice-chairman of Tata Consultancy Services and
an advisor to the Prime Minister for the National Council of Skill
Development.
Developing India’s human capital is essential in the coming decade,
Ramadorai noted. To make manufacturing a genuine engine of growth, the
government has announced new policies as part of the 12
th
five-year plan
(2012-2017) that aim to create 100 million work opportunities by 2022
many in labor-intensive manufacturing sectors such as textiles, gems and
footwear.
The government is also working to expand access to education and vocational
training for workers in the countryside, including new rural broadband
networks that will connect remote areas with educational opportunities.
“Technology is going to play a very critical role in connecting the haves and the
have-nots,” Ramadorai said.
With the right skills and training, Ramadorai sees workers from India
prospering not only at home but also abroad. According to the United Nations,
the working-age population will increase by about 600 million globally in the
next decade. While there will be a decline in the developing countries by
almost 17 million, the global economy as a whole is expected to experience a
skilled manpower shortage of 56 million by 2020, he added.
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India will be one of the few countries in the world with a working age
population that exceeds its number of retirees. “By 2020, the average Indian
will be only 29 years of age, compared with 37 in China and the U.S., 45 in

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India’s Demographic Dividend: Asset or Liability? Half a century ago, there was only one answer to the question of India’s growing population. In a 1967 book titled Famine 1975!: America’s Decision: Who Will Survive?, U.S. economists William and Paul Paddock even advocated that the population of India should be allowed to starve as the country was a hopeless case. America should allocate its aid dollars to other countries with greater chances of being able to feed their hungry, the authors argued. Ten years ago, the India’s growing masses — the population officially crossed one billion in 2000 with the birth of Aastha Arora on May 10 of that year — were still considered a liability by many. Providing basic needs for all seemed to be a near-impossible task. Somewhere along the line, however, economists discovered a silver lining: The world was aging, but India was growing younger. There was a “demographic dividend” that the country could hope for, and ultimately exploit. Ann April 2012 International Monetary Fund (IMF) paper titled, “Asia and the Pacific: Managing Spillovers and Advancing Economic Rebalancing,” noted that “in many Asian countries, aging populations are now causing, or are about to cause, a decline in the working-age ratio. The Japanese workforce has been shrinking since 1995, and the Korean workforce will start to decline beginning 2015. China’s working-age ratio will peak in 2013 and then decline by a substantial amount in the next ...
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