With a population of 1.3 billion, India faces many challenges such as tackling the current public health emergency, creating more jobs, managing macroeconomic shocks and mitigating climate change. But India also has a secret asset: its young population profile.
India has the potential to achieve much faster economic growth than both China and the US. Its population profile should boost growth through five different forces. First, the Indian labor force swells as its baby boomers reach working age. The second is the possibility of diverting resources from spending on children to investing in physical and human infrastructure. Third is the increase in women’s labor force activity, which naturally decreases fertility. Fourth, working age is also a major year for savings, which is crucial for joining capital and technological innovations. Fifth is the incentive to save for longer retirement with increasing longevity.
The least economically developed states in India (Bihar, Uttar Pradesh, Madhya Pradesh and West Bengal) benefit the most from that population dividend. India is at a stage in its population transformation where focusing on the policy environment increases the chances of reaping the benefits.
The economic benefits of population transformation do not arise automatically. They need dividend collection policies. There are several ways in which this can be done. Let’s take a look at these.
First, investment in human and physical infrastructure must increase significantly to promote entrepreneurship and create jobs. Investing in education is crucial to ensure that working-age people are prepared for the demands of the economy. As industry and services play much larger roles, the need for an educated workforce has increased.
Second, promote entrepreneurship and job creation. Since historically the majority of the population is of working age, this work is very important. Although there is no single way to work for all countries, there is a broad consensus on the role of relative power and entrepreneurship in capturing population dividends. India needs to realize labor in productive employment, promote relevant programs and policies and have well-trained individuals to achieve these goals. Governments that ensure respect for property rights, the sanctity of contracts, and the rule of law can create an economic environment that contributes to the realization of the desired dividend.
Third, the time has come to implement the next generation of economic reforms to provide effective public services, particularly focusing on the long-neglected social needs of nutrition and health services, the improvement of the quality of primary and secondary school education, tertiary education, water supply and sanitation. , And urban development.
We must avoid dangers. What happens if India fails to get its population dividend? Most working-age youth remain unemployed or unemployed. It is already a growing concern that the Kovid pandemic has so far affected 300 million people. This situation may become much worse than it is now. A large number of the unemployed increase the share of the population that is dependent on workers, further slowing growth. The economic insecurity of the elderly will increase as governments and families will have less productive workers to produce the wealth they depend on to support their elderly and the sick.
India is already facing a job crisis as investments in human infrastructure do not continue its population transformation. Women workers have been severely affected, with India having the lowest labor force participation rate in the world. While overall labor force participation is declining worldwide, on average, women’s participation has increased in high-income countries that have introduced gender-sensitive policies such as parental leave, subsidized childcare and job access. India has a lesson in this.
To get the desired population dividend, Indian policymakers need to identify what skills are in demand and also identify the strongest growing sectors of the economy in manufacturing and modern services. Skills development and training to acquire these skills should be central to educational and employment programs. India needs to increase the supply of large and highly educated manpower. School policies should provide higher quality and greater educational opportunities for young people.
At present, however, India faces a crucial challenge in tackling its health health emergency. Policymakers urgently need to increase testing levels, minimize implementation failures in the spread of coronavirus, and minimize its impact on other health services.
The country needs to do more to help many families affected by the Kovid pandemic, especially low-wage workers, who have been displaced from their jobs by lockdown barriers and a weakening economy.