Challenges and Opportunities of Population No. 1

To go from 'Skill Bharat' to a 'Skilled Bharat', the participation of the private sector is pivotal. — Vinod Johri

 

Bharat has become the most populous country by overtaking China by mid-2023, the United Nations Population Fund said in in its latest report on world population. Our population in 2023 stood at 1,428.6 million compared to China’s 1,425.7 million. But this distinction is not coveted until our country excels China in economy and successfully reaps the advantages of the the demographic dividend. The demographic dividend is 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). According to the United Nations Population Fund’s (UNFPA) State of World Population Report 2023, Bharat’s working-age population is rising and stood at 68% compared with 67.3% in 2020 and 66% in 2015. China, on the other hand, has a working-age population of 69%, but it is declining from 70.3% in 2020 and 73% in 2015.   At the same time, those aged 65 years or above—considered out of the workforce and dependent on social security/income of the younger population—account for just 7%, lower than the 10% share in the global population. The demographic window won’t be open forever either. Bharat’s population could start declining in 2047 and fall to 1 billion people by 2100, according to UN estimates.

Bharat surpassing China in population, can be postulated another way – by 2030, over 1 billion people of our country will be within the working age group of 15-64. This will position us as a powerhouse of human capital and the largest producer of human resources in the world. This presents us with an unprecedented opportunity to leverage our phenomenal demographic dividend. Bharat’s young are already a big asset. There are over 100 unicorns and more than 90,000 startups. Our country’s startups are innovating in core sectors such as healthcare, education, agriculture and financial services. Bharat also has the largest pool of Science, Technology, Engineering & Maths (STEM) graduates and at 47%, is the global leader in STEM women graduates. This youth bulge, if correctly nurtured, will yield critical thinkers, change makers and leaders who will drive Bharat’s growth story in the next few decades. It is imperative now more than ever to invest in the overall well-being of this young population through a convergent approach across sectors like health, nutrition, education, skill development and financial inclusion. With 26% of the population in the age group of 10-24, the welfare of adolescents and young adults across urban and rural Bharat must be a key priority for all development programmes. Investment in primary healthcare through schemes like PMJAY, national nutrition missions and education initiatives, including NEP, are already making a difference. With improved outcomes in health, nutrition and education the young will be better prepared to enter the workforce and contribute to the economy. At that juncture, investment in skill development will play a pivotal role.

There are challenges and opportunities of the largest population and also certain lessons to learn from China. Population control as such or legislation to this effect may have disastrous consequences particularly on sex ratio and the ageing patterns, so the best way is to frame policies for stabilising the population, healthcare, infrastructure for growing population, education and skilling including re-skilling and upskilling of our young population and making our country a manufacturing hub. Facing rising labour costs in China, many companies have already begun shifting their manufacturing operations to lower-paying countries like Vietnam and Mexico.  While our population ages with the birth rate falling and longevity increasing, the next few years would be crucial to address structural issues that could accelerate Bharat’s economic growth.

Bharat and China may have many differences in terms of their race and culture, but patriarchy is common to both. Bharat had 1,073 male births per 1,000 female births in 1991, which reached 1,093 in 2001, 1,095 in 2011, but has dipped to 1,079, according to World Bank Gender Portal. This has been achieved as a result of developmental efforts, including improved sexual and reproductive health and family planning services, secondary school education for girls, improved opportunities for women workers and breaking patriarchal norms.   National Family Health Survey conducted by Ministry of Health & Family Welfare, shows that focused programmes such as Mission Parivar Vikas in high fertility districts have already begun delivering results.

Serious Issues for Consideration

1. Economists have advised that the country has to fix its structural issues fast, accelerate investment in health & education to improve employability of its workforce. In parallel, land and labour reforms must be taken forward to boost the country’s manufacturing competitiveness so that the potential of the sector to create millions of jobs could be tapped.  Similarly in the services sector, the Union government and state governments will have to take steps to accelerate manufacturing activity to harness the full potential of its relatively young population, experts said.

2. During a demographic transition – where fertility rates decline, life expectancy rises and workforces grow – human capital investment could trigger a demographic dividend, not only through greater economic productivity but also from more health, education and empowerment.

3. While we have a new education policy and the Centre and states together have targeted to invest 6% of GDP, the actual investment is just 2.9% of GDP. Consequently, we are also generating unemployable. In education, another critical area, public investment is just 1% of GDP. The 15th Finance Commission had recommended that Bharat’s public expenditure on health should increase to 2.5% of GDP by 2025.   

4. According to UNFPA, our country needs to address the diversity between States. While we are a young country, the status and pace of population ageing vary among States. Southern States, which are advanced in demographic transition, already have a higher percentage of older people. These differences in age structure reflect differences in economic development and health – and remind us of States’ very different starting points at the outset of the 2030 Sustainable Development Goals Agenda. But this also offers boundless opportunities for States to work together, especially on demographic transition, with the north-central region as the reservoir of Bharat’s workforce.

5. Labour laws are still restrictive and compared to nations like Bangladesh or Vietnam, Bharat is expected to create the highly-efficient industrial parks preferred by many global manufacturers.

To go from ‘Skill Bharat’ to a ‘Skilled Bharat’, the participation of the private sector is pivotal. A private sector-led skilling ecosystem will also ensure that skill development is demand driven and addresses the needs of the market. That’s the key for young, educated people to get jobs. Entrepreneurship and Swavlamban are important pillars of job creation. With more skilled young people joining the formal workforce, consumption will increase, giving a fresh boost to the economy. This increase in purchasing power will be fortified by our exemplary financial inclusion and digital payments ecosystem. The mammoth success of PMJDY accounts, Ru-Pay cards and the UPI platform has already pulled millions into the formal economy. To fully reap benefits of the demographic dividend, we must also acknowledge that women are the most significant stakeholders in this endeavour. The Prime Minister Shri Narendra Modi ji   has called for prioritising women-led development in the G20 agenda.

Bharat is getting closer to its goal of becoming a global manufacturing hub and can also potentially become the startup capital of the world with one of the largest digital user bases, an enabling policy environment and access to large pools of capital. Bharat’s G20 presidency is a good reminder that we must utilise our young population, which means we have a low dependency ratio, to achieve sustained and resilient growth. Bharat can become the nerve centre for exporting skilled manpower to the world. Apple Inc.’s three key Taiwanese suppliers won incentives from Bharat to boost smartphone production and exports. The California-based company now makes almost 7% of its iPhones in Bharat, up from about 1% in 2021. 

The world concerned over China’s shrinking population  

a) The global economists and others are concerned by the developments. The shrinking workforce could stumble the global economy. For years, China’s massive working-age population powered the global economic engine, supplying the factory workers whose cheap labour produced goods that were exported around the world. In the long run, a shortage of factory workers in China — driven by a better-educated workforce and a shrinking population of young people — could raise costs for consumers outside China, potentially heightening inflation in countries such as the United States that rely heavily on imported Chinese products. 

b) A shrinking population could also mean a decline in spending by Chinese consumers, threatening global brands dependent on sales of products to China. The data is bad news for China’s crucial housing market too. China has also been unwilling to loosen immigration rules to boost the population, and has historically issued relatively few green cards to replenish its shrinking workforce. 

c) To address the labour shortage, China has been outsourcing low-skilled production to other countries in Asia, and adding more automation to its factories, hoping to rely more on artificial intelligence and technology sectors for future growth.

This is not just about rejoicing on rankings as in the end it is about providing a better quality of life for our people and also to create a system which allows for innovation, risk taking, entrepreneurship and so on.  The need is to plan for improving health and education outcomes for the younger segments of the population, provide skilling opportunities and create sustainable and robust livelihood opportunities. Against the decline in fertility rate and the implications for the age distribution of the populations in the coming decades, we also need to put in place the right social security structures as foster a robust care economy, healthcare, gender justice, long-term plans for reskilling and upskilling, along with a focus on sustainable consumption. Rapid progress on infrastructure, human development and manufacturing will be needed for decades, not just years, as the population continues to swell. It’s expected to reach 1.67 billion by 2050 – that’s another 250 million people, or roughly the size of Indonesia. qq

 

Vinod Johri, Retd Addl. Commissioner of Income Tax, Delhi

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