Demographic Dividend for India


Demographic Dividend for India

May 18th, 2011 4 min read
Lisa Curtis

Senior Research Fellow, Asian Studies Center

Lisa focuses on U.S. national security interests and regional geopolitics as senior research fellow on South Asia.

Indians have long viewed their growing population as a disadvantage when it comes to future development and maintaining social and political stability. But several years of strong economic growth, a robust military modernisation campaign, and greater recognition of India’s emerging global status has changed the conversation about Indian demographic trends.

With a median age of 25 and more than 11 million workers per year expected to come over the next two decades, the focus now is how India can reap a ‘demographic dividend’ — increased savings and capital creation from a rise in the number of workers relative to dependents.

Demographic trends could help tilt the Asian power balance more in India’s favour — if New Delhi starts planning now for the challenges of educating and employing this rising tide of youth. 

Recently released figures from the 2011 census put India's population at 1.2 billion. It’s  poised to surpass that of China sometime around 2030. India’s youthful population stands in contrast to China (median age: 35) and Japan (44).

To achieve a demographic dividend from the surge in numbers of the working-age population, India must cope with a number of socio-economic challenges the same demographic indicators are exacerbating. These challenges may require Indian policy-makers to make trade-offs regarding the resources they dedicate to maintaining internal security versus projecting power beyond India’s periphery.

Literacy rate

The more attention Indian officials pay now to coming up with solutions that address these socio-economic challenges, the better poised India will be to ensure its growing working-age population will translate into more leverage and influence on the international stage — and within the Asian power balance.

By far, the biggest challenge lies in educating the increased numbers of youth. The best news that came from the 2011 census data was the increase in the literacy rate to 74 per cent, up 10 percentage points from 2001.

Still, if the coming waves of Indian youth are not educated adequately, they will be unprepared to enter the work force. They also will be more likely to contribute to social tensions and become a drag on the economy, rather than part of the expected economic dividend.

Recent Indian legislation mandating free public education for all citizens is a step in the right direction. But the government will have to follow it up with concrete moves to incentivize education, particularly for the rural poor.

Allowing the private sector to meet increased demand for education would help alleviate the problem. Already about 50 per cent of primary students seek education at private schools.

The idea of school vouchers — government funding students, rather than schools — also is gaining steam. Many argue that when a student determines where public funding goes, it brings more competition and thus better education.

Another challenge India must prepare for is urbanisation. Three out of 10 of the world’s largest cities are in India. Sprawling, impoverished cities are more vulnerable to gang activity, crime, and terrorist recruitment. India must prioritise municipal planning and strong local governance and unburden city planners from state-level bureaucracy.

Gender ratio

Perhaps the most disheartening news from the 2001 Census is the widening gender gap. Despite economic development and social change in India, the preference for sons remains high — there are 914 girls for every 1,000 boys.

If the number of Indian females continues to decrease relative to the number of Indian males, this could become a significant source of social instability. The problem manifests itself when marriage rates decline and unmarried men have trouble finding jobs.

This issue was first highlighted by Nobel Peace Prize winner Dr.Amartya Sen, who blasted the sex selection phenomenon both on ethical and national security grounds, arguing that skewing the sex ratio in favour of men would impede economic and democratic development and jeopardize internal stability in India.

If private and public planners begin implementing policies now to cope with the challenges laid out above, they will help ensure India plays an increasingly influential role on the global stage, particularly in the Asia-Pacific.

Growing Indian trade, currently at $500 billion, and increased Indian reliance on foreign resources (India’s energy needs alone are expected to increase 3.5 times by 2025) dictate that India will continue to invest in maritime security to protect the free flow of this trade. US Secretary of Defence Robert Gates gave a nod to the potential for Indian power projection when he acknowledged last year that “as Indian capabilities increase, India will be a net provider of security.”

India will have to manage a balancing act, though, as it seeks to expand economic opportunity for all its citizens, while projecting strength outside its borders and managing border tensions with Pakistan on one side, and China on the other.

Separating India’s demographics from its strategic destiny is nearly impossible. For the next two decades, India will be forced to address the challenges of its demographic boom. Yet with China’s rapid global rise, and its more assertive stance on India-China border issues, India must also increasingly project power, both hard and soft, beyond its borders to compete with — not necessarily confront — the Chinese.

Given US concerns about lack of transparency in Chinese defence modernisation and with China’s new-found assertiveness in the seas off its coast, Washington should welcome India’s enhanced role in the Asia-Pacific. It also should develop policies that support India in coping with its demographic challenges.

Overall, if India plays its economic and educational cards right, India’s youthful population will serve as an asset in fulfilling its geopolitical ambitions and contribute to its ability to project power beyond the Indian periphery and into the broader Asia-Pacific region.

Buttressed by a strong US-India partnership, India’s demographic and strategic destiny will affect the Asian strategic balance in ways that promote healthy competition among regional powers and push the region toward greater economic and political stability.

Lisa Curtis is a senior fellow at The Heritage Foundation.

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