Demographic Dividend
I don’t
remember when I first came across “demographic dividend” but it must have been
in the heady days of early 2000’s when the world seemed to have finally broken
free of the brick and mortar and was soaring into the brave new millennium. It was a cute little term which immediately
assured all of India that things were under control and absolutely on track. We
may have problems about food security, water shortage, power shortages, unemployment
and poverty for the moment but we sure had a bright future ahead of us. That
was karma, ordained in our national destiny.
One could
almost hear a collective sigh of relief from the politicians. There it was. The
writing was on the wall. No need to worry about those teeming millions clamouring
for such mundane things like roti-kapdaa-makaan. It was beyond the teeming
millions to imagine just what bounties were in store for them. They just needed
to be patient (maybe for a generation or two) but we will surely feed them
Mongini’s cakes, dress them in the finest of Raymonds and house them in New
Cuffe Parade. Demographic Dividend, you see, would bring everything that
everyone ever desired. So let the party begin. Achhe din toh aanewaale hi
hai.
Demographic
dividend as a term seemed to be very very Indian, if you get what I mean. We
Indians have always been good at making up these sexy sounding slogans and
phrases. Take for example “mera Bharat mahaan”. While I would much
rather believe in this concept, the reality seems to be somewhat different. As
some wit proclaimed “sau mein se ninyaanbein beimaan, phir bhi mera Bharat
mahan”. Or consider “satyameva jayate”; it may very well translate
to “the Truth alone shall triumph” but little does one see Truth manifest
itself and forget about it prevailing anywhere. The only ones perhaps to have
benefited from this slogan satyameva jayate” are Aamir Khan and Star
Plus who leveraged the phrase to make a successful TV show.
Surprisingly,
demographic dividend turns out to have a non-Indian origin with no less than
hallowed UN defining it. Demographic
dividend, as defined by the United
Nations Population Fund (UNFPA)
means, “the economic growth potential that can result from shifts in a
population’s age structure, mainly when the share of the working-age population
(15 to 64) is larger than the non-working-age share of the population (14 and
younger, and 65 and older).” In
other words, it is “a boost in economic productivity that occurs when there are
growing numbers of people in the workforce relative to the number of
dependents.” UNFPA states that,
“A country with both increasing numbers of young people and declining fertility
has the potential to reap a demographic dividend.
Well, so far so good. But like all the attractive schemes
that one comes across, this one also has a “terms and conditions apply” clause
attached to it. So if one were to go through the fine print, like anyone with
common sense should, one would immediately understand that in order for
economic growth to occur the younger population must have access to quality
education and employment opportunities. And therein lies the problem of the
elusive demographic dividend.
In his latest book “The Rise and Fall of Nations”
Ruchir Sharma has dealt with this issue in detail, citing numerous cases across
a large number of economies and over a fairly substantial period of about 50
years. The conclusions and observations that he has drawn are fascinating to
say the least.
Obviously the first conclusion about demographic
dividend is that the increase in population is in no way a sufficient condition
for creating growth. It’s true that there have been a number of instances in
last 50 years where a few countries did show a growth in GDP of more than 6%
per annum and an increase in population of 2.7% per annum, but during the 60s
and 70s many countries in Africa and China and India also had a similarly
healthy increase in population but no matching increase in GDP. On the other
hand these countries had to battle unemployment, famines and civil strife. In
Arab countries, considered as a group, the population grew at a rate of more
than 3% during the 20 year period between 1985 and 2005 but there was no
proportionate growth in GDP.
In the countries that have reaped this demographic
dividend, almost half the growth has come from the increase in population and
the balance from improvement in productivity. This seems to be a rule of thumb
applicable to the demographic dividend story.
But the world seems to moving into a low population
growth zone. Many developed countries are already in the Zero Population Growth
zone (ZPG) and countries like Japan are already in the negative zone. Even
China which had followed the one-child per couple policy is now in negative zone.
(It is true that China has now abandoned the one-child policy but the effects
of this change are going to take a long time to materialize).
In 2005, the European Commission warned that “there
never has been a growth without population increase”. In today’s world
post-crisis of 2008, very few countries have a strong population growth that could
be a possible precursor to generation of demographic dividend. For that matter
even India is slowing down and for the first time since the census of India was
instituted, the rate of increase of population has fallen to 1.64% per annum
over the decade of 2001 - 2011. Moreover, the population in the age group 0-6
years is almost unchanged over this period which shows that the increase in overall
population is due to decrease in mortality and therefore aging of population. True
the population will still keep on growing for a few decades but it will do so at
a diminishing rate if the present trend persists. But as the population ages
the ratio of working to non-working population is going to deteriorate with
time.
The second premise on which the concept of demographic
dividend rests is the job creation for new entrants into the working age-group.
Here too, we in India, are going to find that things have changed radically. Global
growth itself is slowing down and no major country has regained the growth
rates it enjoyed before the 2008 crisis. We have been hopeful of replacing China
(at least partially) as the powerhouse of manufacturing since the Chinese are pricing
themselves out with higher wage rates. But the recent trends have belied this
hope. China is being replaced not by India but by Bangladesh, Vietnam and a few
other developing countries which are fast getting their act together. After all
we have not made much progress on making India a business friendly place. In
short, there is not much on economic horizon which will create jobs for the 12
million of Indians entering job market every year notwithstanding the hype
about “make in India”. A worthy concept no doubt but one which is unfortunately
a couple of decades too late.
We Indians have been fairly used to things which run
late. Train travelers routinely experience being stranded on a crowded platform
waiting for a train which is long overdue and expected any moment. Everyone hopes
that although the train is late, it will arrive soon and then it will somehow
make up for the lost time. Today whole of India is on the platform waiting for
the train. But the realist in me is afraid that suddenly the PA system will crackle
into life and some announcer, in a hurry to close shop and go home, will
announce “We are sorry to inform you that The Demographic Express going to Dividend
Nagar is delayed indefinitely. We are very sorry for the inconvenience caused
to the travelers.”
Cheers
LazyBee
7th April 2017
Credits:
1. As you would have no doubt realized the
trigger for this article has been provided by “The Rise and Fall of Nations” -
by Ruchir Sharma - Published by W W Norton & Co, New York – 2016 from where
the past data of countries has been taken.
2. The Indian demographic data was obtained from the official site of Indian
Government - Office of the Registrar
General and Census Commissioner, Ministry of Home Affairs, www.censusindia.gov.in
3. Any misinterpretations in above, if any, are
solely mine.
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