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Demographic gift

As the developed world ages, India seems poised to seize new opportunities By 2025 India's working age population will grow to 87 million, against 19 million in the US

india Updated: Jan 22, 2006 23:40 IST

By 2020, an average Indian will be 29 years old, compared with 37 for Chinese and Americans, 45 for West Europeans and 48 for Japanese according to an unpublished analysis by Morgan Stanley.

UN's World Population Ageing report, 2003, estimates that until 2040 India will re- main one of the youngest countries in the world. Its current population of children below 14 (33 million) is more that the cur- rent US population (28 million). Its working age population (15-59 years) is almost four times that of the US and its proportion of older people (60 plus) at 7.6 per cent is far below the global proportion of 10 per cent.

By 2025 India's working age population will grow to 87 million, against 19 million in the US. The proportion of older people in India will be 12.5 against 25 per cent in the US. The report estimates that this demographic dividend for India will peak around 2040 and start to decline only after 2050.

The big picture is that the total dependency ratio (total of under 15 and over 60 people per 100) is in India's favour. The key fiscal problem of the developed countries is the rapid rise in the total dependency ratio from about 48 per cent now to 57 per cent in 2025 and 73 per cent in 2050. India's current ratio of 62 per cent will slide to 46 per cent by 2025.

The population of old is growing faster than the total population in all regions of the world, but more in the developed nations. Worldwide, currently the growth rate of the older population at 1.9 per cent is higher than that of the total population growth at 1.2 per cent.

Similarly, the young-old balance is shifting. In developed regions, the proportion of the aged already exceeds that of children and by 2050 it is expected to be double.

As the rich nations age, more workers will continue to enter India's work force. A Goldman Sachs report estimates that by 2020 the US will be short of 17 million people of working age, China 10 million, Japan 9 million and Russia 6 million. For a total shortfall of 42 million for all these countries, India will have a surplus of 47 million working age people. A German Institute of Economic Research study of 2001 says that the country would need 1.2 million immigrants annually to offset labour shortage.

India's advantage is not restricted to supplying immigrants. With its competitive labour costs, it can also provide a host of business and back office services. All India Management Association and Boston Consulting Group estimate that by 2020, India Inc. Can generate $139-365 billion of additional revenue from these opportunities, pushing the GDP growth rate by an additional 0.6-1.5 per cent. Also the employment generation (direct and indirect) in the range of 20-72 mil lion can be a boon for new graduates.

The advantage for India is apparent in rising numbers of an educated and assertive Gen-X. The next section shows how things are moving towards that change and how it is an opportunity to be grabbed.

* 64.3% will be India's working age population (15-59 years) in 2025 against US's 56%

* 46.1% will be our total dependency ratio in 2025 against world's average 53.2%

* 23.2% will be our proportion of younger people (0-14 years) in 2025 against China's 18.4%

* 12.5% will be India's proportion of old people (60+ years) in 2025 against developed countries 28.2%

* 2.8% is India labour force growth; population growth is 1.5%

* 0.8% will be India's average annual population growth rate in 2025 against 1.5% now