Can India get rich before growing old?
Overview:
Ever since the economic liberalisation, the Indian demographic dividend has shown a large working-age population that guaranteed the country’s prosperity but the present concern is whether the country is leveraging this potential. The article, Can India get rich before growing old?, discusses various dimensions surrounding India’s potentials.
Relevance:
GS – 2, GS – 3 (Growth and development, Government Policies & Interventions)
Dimensions of the Article:
- India’s Present condition
- Challenges to Harnessing the Demographic Dividend
- Suggested Measures for Growth and Development
India’s present condition:
- Large Working-Age Population: Around 75% of India’s population is aged 15-64, presenting an opportunity to drive economic growth.
- Declining Fertility Rate: India’s total fertility rate (TFR) has been decreasing faster than expected, now at 1.99, below the replacement level of 2.1. Southern states, in particular, show lower rates, which suggests an ageing population in the near future.
- Labour Force Struggles: India’s urban labour force participation rate (LFPR) is low at about 50%, with many stuck in low-paying agricultural jobs or preparing for competitive exams without gainful employment.
- Middle-Income Trap Threat: If economic growth does not accelerate, India could face a “middle-income trap” where the economy stalls before reaching high-income status, as seen in countries that struggle with development beyond a certain threshold.
Challenges to Harnessing the Demographic Dividend
- Employment Sector Stagnation: Many remain in low-productivity sectors like agriculture. While China reduced its agricultural workforce significantly after liberalisation, India’s reduction has been relatively minor.
- Manufacturing Sector Growth: The manufacturing sector did not see much growth as compared to the service sector, which has hindered job creation for a large part of the workforce.
- Infrastructure and Policy Barriers: High costs and regulatory constraints deter manufacturing growth. Business licensing, customs regulations, and land access are challenging, making it difficult for manufacturers to operate efficiently.
- Education and Skill Gaps: The workforce lacks the skills needed for high productivity jobs, which makes transitioning to sectors like manufacturing challenging.
Suggested Measures for Growth and Development
- Shift Focus to Manufacturing: Encourage movement from agriculture to manufacturing to create higher productivity jobs. Labour-intensive industries like textiles and apparel, which employ millions, could be prioritised.
- Improve Business Environment: Simplify business licensing and reduce tariffs to make manufacturing inputs cheaper. State governments should enact labour reforms to improve flexibility and attract investment.
- Enhance Infrastructure: Invest in transmission, transport, and logistics infrastructure to support high-capacity manufacturing hubs.
- Strengthen Trade Agreements: Finalise free trade agreements (FTAs) with key markets like the EU and the UK to expand export opportunities and stimulate growth in Indian manufacturing.
Way Forward
- In order to efficiently utilise the country’s demographic dividend, India should focus on shifting its workforce from agriculture to high-productivity sectors.
- India should also bring more policies to ease various regulatory bottlenecks to improve its manufacturing sector.
- India should prioritise and utilise its demographic division wisely before it becomes a missed opportunity.
