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A massive dividend, but can we cash in?

FOUNTAIN OF YOUTH: India's young would-be consumers could transform the country - if only we let them. Nandan Nilekani, co-founder of Infosys and chairman of the Unique Identification Authority of India, writes.

india Updated: Jan 03, 2011 13:23 IST

Young people in a a country tell us more about a nation's future than any other demographic, and in India, they are clamouring to be heard. The nation's young population now dominates our demographics, and they are increasingly remaking the country in their image.

India is currently experiencing the biggest demographic dividend in global history. The large numbers of young people present a potent advantage for the country, helping turbo-charge its rise and productivity. As young consumers not tied to previous patterns of spending and saving, they are helping drive India's dynamic domestic market. They are also fuelling entrepreneurship across the country - both as small business owners and as heads of larger firms that are charting new territories and delivering innovative new products and services. Some of India's largest companies today are in fact firms that emerged in the 1980s and are helmed by young leaders.

Forecasts for next decade

The dividend, however, is testing the resilience of India's policies and markets. Over the next two decades, India will have to work hard at equipping its hundreds of millions of young people with the skills they need to participate in the economy, with jobs to be productive in, and with social protections to sustain them in the long term. Our success here, and our willingness to innovate, will determine how we bridge, over the next two decades, the distance between the India that is and the nation that we hope to be.

Transforming demographics


A senior Indian political scientist and peers, on first hearing his name, were often astonished that someone from one of India's poorest states could have achieved his level of success.

"The central states, where I am from, became synonymous with backwardness," he said. But as the demographic transition takes root, it is changing this region in particular, and the impact is being felt across the country.

India's demographic dividend occurred in two phases, since birth rates first fell in southern and western India due to social efforts and better health care. These regions, as a result, experienced their demographic dividend quite early - through the 1980s and early 1990s, when they saw rapid social and economic development. But with fertility rates falling sharply, the demographic dividend in the south is drying up, while in the north it is only beginning to crest. At the extremes, the fertility rate of Uttar Pradesh stands at 4.7, while in Kerala it is 1.8.

Consequently, today, the south and west, the traditional sources of India's growth, are ageing. By 2025, the average age of this region's population will be 34, similar to Europe in the 1980s; in contrast, the average age of the population in the north will be just 26. India's demographic advantage is now coming overwhelmingly from north India, specifically central India.


This regional dividend has helped fuel the present-day migration of millions of young workers from countryside to cityscape - people who are moving to urban India in search of better jobs and opportunities. The large-scale migration is driving the growth of India's urban population by approximately 31 people every minute.

India's small towns and villages are engendering a new economic and social culture. They often come from poor, rural backgrounds, with no history in either entrepreneurship or as consumers. As a result, they are following entirely new patterns of consumption and ways of doing business. It is not surprising, then, that you find dynamic young businesses exporting items such as leather goods and garments in the Dharavi slums, where the majority of Mumbai's migrants live.

These migrants care little for the totems of the past. One prominent NGO worker recently described how a young migrant couple living in Mumbai knew little of the famous temples and sights in the city: "We are only here to make a living... [we are here] so that our children will have a better life," they said.


The impact of the dividend has not been limited to urban India. The migrants who work in India's cities are remitting money to their families back home, and these cumulative cash flows are estimated to be in the thousands of crores. In villages an Aadhaar team visited for the Unique Identification Project, residents noted that these remittances were upending traditional hierarchies as money sent by migrants from backward communities helped their families build larger houses and move into the wealthier areas. Transforming demographics

At the same time, better road connectivity, the use of mobile phones, and exposure to the same cable channels pervasive in India’s cities mean that the youngsters who have remained in the villages are not too different from the ones who migrated. Across the rural countryside, our team came across people who drew their cues from urban India in the brands they were familiar with, the jeans they wore and the goods they purchased. We are our seeing our traditional boundaries fade — the divides between urban and rural India, between the poor states and the rich, and between communities.


The blurring of these boundaries means that India — particularly the young — are increasingly aspiring for the same things across income classes, communities and geographies. When my wife visits villages in the course of her NGO work, she often asks the children what they want to be when they grow up. The responses she hears most often are ‘engineer,’ ‘doctor’, and ‘teacher’.

Millions of rural families in India are educating their children in the best schools they can afford to ensure that they have opportunities beyond the backbreaking work of agricultural labour. My wife has yet to hear a child say he/she hopes to be a farmer. Such aspiration is, in my view, the most profound development of the last few years, and the defining mood of India today. As a young, fast-growing nation, we are now at an inflection point in terms of our development: We have the opportunity and the aspiration to transition over the next two decades into a developed country.

Making this transition, however, will require policy measures to address at least some of the challenges we now face. For our educational and health investments to pay off, we must ensure that our welfare programmes reach their beneficiaries more effectively. We need to enable wider, more equitable access to basic services such as housing and finance, which are essential if people are to accumulate incomes and leverage the opportunities they have. There will be no second chances here; India must build the infrastructure, governance systems, and markets that will sustain the country’s development before this population starts to age.


India is a young country with an old, complex history, and it is consequently subject today to two forces — the push from the millions of young people who have an eye on the future and are demanding better, more innovative solutions, and the inertial pull to do things as they have always been done, and avoid change.

Our success in boosting opportunity, jobs and growth in the next two decades will depend on how we manage to overcome this natural resistance and implement the change that we need with such urgency in our policies and our markets. In their aspirations, the current generation of young workers echoes the sentiments of China’s poor in the 1970s, when the country’s growth was taking off — the idea that “we will be masters of our own fate yet”.

Our young workers believe it doesn’t matter where they are from; what counts is where they are headed, and the skills they possess. It is our task, in the coming years, to prove them right.

(Nandan Nilekani is co-founder of Infosys and chairman of the Unique Identification Authority of India)

*The views expressed by the author are personal

First Published: Dec 30, 2010 18:49 IST