Can India’s demographic dividend turn into liability? Read here

The statement comes as it is known that India is expected to add another 183 million people to the working age group of 15-64 years between 2020-50.

The Confederation of Indian Industry (CII) released a report on India’s Demographic Dividend on Sunday. The report warns that there is an acute shortage of time and that India’s working age population is necessary but not sufficient for it to sustain the economic growth.

“If India does not create enough jobs and its workers are not adequately prepared for those jobs, its demographic dividend may turn into a liability. And education and skill development will be the biggest enablers for reaping this dividend,” the report said.

The report points out that India will add another 183 million people to the working age group of 15-64 years between 2020-50 as per the UN Population Statistics database. Thus, a whopping 22 per cent of the incremental global workforce over the next three decades will come from India.

“Although investment, reforms and infrastructure are likely drivers of India’s economic growth, no growth driver is as certain as the availability of people in India’s working age group. India’s young population, its demographic dividend, gives India the potential to become a global production hub as well as a large consumer of goods and services,” highlighted Chandrajit Banerjee, Director General, CII.

However, India does not have much time to utilise this dividend, cautions the report.

“While we are likely to add 101 million people in the working age population between 2020-30, this number will reduce to 61 million and then to 21 million for 2030-40 and 2040-50, respectively. It is expected that India’s working age population will start declining in the decade post 2050,” it said.

Thus, 2020-50 provides India with a short window of opportunity to harness its demographic dividend.

The report said that high quality school education, relevant higher education and skill development aligned to industry needs are some of the pre-requisites, if India is to become an economic powerhouse which not only creates good quality jobs for its youth, but also services the rest of the world.

Banerjee, said, “Children have been away from schools for two years because of the pandemic. The resultant learning losses have added to the already high learning gaps, which existed even before the pandemic. A mission-mode catch-up campaign is needed, of the kind CII has been running for the past several months.”

The report analyses India’s labour market imbalances, and highlights how the skill mismatch and shortage can impact productivity growth, which is critical for India to enhance its long-term growth. In 2019-20, only 73 million of India’s 542 million strong workforce received any form of vocational training (whether formal or informal).

To put it in global context, the proportion of formally skilled workers as a percentage of total workforce stands at 24 per cent in China, 52 per cent in USA, 68 per cent in UK and 80 per cent in Japan, against a paltry 3 per cent in India, the report stated.

To overcome such challenges, the report suggests that youth may be offered skill vouchers and scholarships which can be linked to the national skill qualification framework.

This can create an industry-ready model, thus leading to a transformation from supply-based to demand-based skill system.

The government should also consider setting up multi skill training institutes in MSME clusters to impart skills based on local demand, it suggested.

“In addition to government initiatives, corporate investment in employee education and training should continue to play a critical role to meet the demand for high-skilled workers. Thus, greater government-industry collaboration holds the key for skilling the burgeoning workforce,” Banerjee said.