Demographic dividend and ageing

Demographic Dividend and Ageing: UPSC GS-1 & GS-3 Explained

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Demographic dividend of India

Demographic Dividend and Ageing: UPSC GS-1 & GS-3 Explained

I. DEMOGRAPHIC DIVIDEND

1. Meaning

Demographic Dividend refers to the economic growth potential that arises when a country’s working-age population (usually 15–64 years) grows larger relative to the dependent population (children & elderly).

This demographic structure increases:

  • Labor supply
  • Savings
  • Productivity
  • Economic output

📌 Key idea: More workers + fewer dependents = higher productive capacity.

2. Demographic Transition Context

Demographic dividend typically emerges in Stage 3 of the Demographic Transition Model, when:

  • Fertility declines
  • Mortality declines
  • Working-age share rises

Countries like South Korea, Japan, China used this phase effectively to boost growth.

3. India’s Demographic Profile

India is currently in the demographic dividend window:

  • Working-age population: ~66%
  • Median age: ~28 years
  • UN projects window till ~2055

India has one of the world’s youngest populations:

  • China’s median age: ~39
  • Japan’s median age: ~49

📌 Thus, India has a strategic advantage over ageing societies.

4. Channels Through Which Demographic Dividend Works

  1. Labor Supply
    1. More workers → higher output (if skilled).
  2. Savings & Investment
    1. Working population saves more → capital accumulation.
  3. Human Capital Investment
    1. Smaller families invest more in education & health.
  4. Women’s Workforce Participation
    1. Fertility reduction → more working women.
  5. Innovation & Entrepreneurship
    1. Young population → technology adoption & start-ups.

5. India – Opportunities to Harness the Dividend

Sectoral Opportunities

  • IT & Digital Services
  • Manufacturing (Make in India)
  • Healthcare & Wellness
  • Green Economy
  • Skill-based Gig and Platform Economy
  • Defense & Aerospace
  • Tourism & Hospitality

6. Challenges in India

Despite the demographic advantage, India faces structural barriers:

(a) Skills–Jobs Mismatch

  • NSO reports: >50% workforce is unskilled.
  • Industry lacks future-ready skills (AI, Robotics, EV, Cybersecurity).

(b) Jobless & Gig Growth

  • High youth unemployment
  • Informal sector dominance (~90% employment)

(c) Regional Variations

  • Southern & Western India: Low fertility → ageing soon
  • Northern & Eastern India: High fertility → youth surge

This is called “Demographic Divergence”.

(d) Low Female Labor Force Participation

  • FLFPR ~23–25%
  • Socio-cultural barriers persist.

(e) Health & Nutrition Deficits

  • High anemia levels in NFHS-5
  • Poor child nutrition affects cognitive development

7. Policy Measures to Harness the Dividend

Government Initiatives

  • Skill India Mission
  • PMKVY (Pradhan Mantri Kaushal Vikas Yojana)
  • National Education Policy (NEP 2020)
  • Make in India & Startup India
  • Atmanirbhar Bharat
  • Digital India
  • National Health Mission
  • Samagra Shiksha

Structural Reforms Needed

  • Labor law reforms
  • Push manufacturing (PLI Schemes)
  • Improve urban planning & migration management
  • Women-centric policies (crèches, safety, equity)

8. International Experience (Value Addition for UPSC)

  • South Korea – Integrated education+industrialization, leveraged demographic dividend to achieve “Miracle on the Han River”.
  • China – Manufacturing boom + SEZs + skill investments created sustained growth.

📌 Lesson for India: Without education, health & jobs, demographic dividend can turn into demographic burden.

II. DEMOGRAPHIC AGEING

1. Meaning

Demographic Ageing refers to the increase in the proportion of elderly population (60+ or 65+) due to:

  • Decline in fertility
  • Increase in life expectancy

📌 Ageing is the later stage of demographic transition, following the dividend stage.

2. Global Context

  • Japan, Italy, Germany = Highly aged societies
  • UN projects global elderly population to reach 2.1 billion by 2050

3. Ageing in India

India is ageing faster than expected due to:

  • Rising life expectancy (~70 years+ average)
  • Declining fertility rates (<2.1 in many states)

Statistics

As per UN and MoHFW estimates:

  • Elderly population (60+): ~10% (2021)
  • Projected: >19% by 2050 (~319 million people)

4. Challenges of Ageing Population

(a) Economic Challenges

  • Shrinking labor force (post-demographic dividend)
  • Increased pension liabilities
  • Rising healthcare expenditure

(b) Social Challenges

  • Elder abuse
  • Loneliness & social isolation
  • Breakdown of joint family system
  • Intergenerational conflicts

(c) Healthcare Challenges

  • Chronic diseases (diabetes, CVD, dementia)
  • Long-term geriatric care needs
  • Lack of geriatric infrastructure

5. India’s Preparedness – Issues

  • Limited pension coverage (mostly unorganized sector)
  • Insufficient old-age homes & care facilities
  • Low insurance penetration
  • Lack of social security for unorganized workers

6. Policy Measures for Ageing

Government Schemes

  • National Programme for Health Care of Elderly (NPHCE)
  • Atal Vayo Abhyuday Yojana (AVYAY)
  • PM Vaya Vandana Yojana (Pension)
  • Indira Gandhi National Old Age Pension Scheme (IGNOAPS)
  • Maintenance and Welfare of Parents and Senior Citizens Act (2007)
  • Ayushman Bharat (geriatric services)
  • National Elder Line (GIS-enabled support)

Required Reforms

  • Elder-friendly infrastructure & housing
  • Geriatric medical training
  • Long-term care insurance
  • Community-based support systems
  • Digital inclusion for elderly
  • Intergenerational solidarity programs

III. INTERLINKAGE: DEMOGRAPHIC DIVIDEND → AGEING

Demographic dividend is temporary, ageing is permanent.

Countries move through a population cycle:

  1. High fertility & mortality → young population
  2. Fertility decline → demographic dividend
  3. Low fertility & high life expectancy → ageing society

India is in Phase 2, moving toward Phase 3.

Key Insight

If not utilized, demographic dividend becomes demographic liability, and eventually, ageing burden without adequate social security.

CONCLUSION

India stands at a decisive demographic moment. While the current youth bulge offers unprecedented economic opportunities, the future presents challenges of rapid population ageing. The ability to convert the demographic window into sustainable growth depends on strategic investment in education, skills, health, women’s participation, and social security. Failure to do so may convert the demographic dividend into a demographic burden.

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