Showing posts with label demographic dividend. Show all posts
Showing posts with label demographic dividend. Show all posts

Tuesday, April 25, 2023

India - A country with biggest population

 As per the recent projections made by the United Nations (UN), India may have overtaken China to become the most populous country in the world. The current population of India is projected to be 1.417bn as compared to China’s 1.412bn.

Notably, China has reportedly recorded a decline in population in the year 2022, as compared to the previous year. This could possibly be due to Covid related restrictions and deaths, but there is no denial that Chinese population growth has been plateauing for a few years, forcing the government to shed its legacy ‘One Child’ policy and encouraging people to have more children. In respect of India, the official data is not available as no official Census has been conducted since 2011. The data is therefore based on various estimates and extrapolations.

Interestingly, The Diplomat, reported that “India’s population has consistently been undercounted. For example, India’s last census, held in 2011, missed 27.85 million people. On the other hand, China has obfuscated its population decline for many years. Yi Fuxian, a senior scientist at the University of Wisconsin-Madison, told Time magazine that “China’s population began to decline 9-10 years earlier than Chinese officials and U.N. projections, meaning that China’s real demographic crisis is beyond imagination…””

China has however downplayed the demographic concerns. Speaking to the media, Chinese Foreign Ministry spokesman Wang Wenbin emphasized that "when assessing a country's demographic dividend, we need to look at not just the size but also the quality of its population; size matters, but what matters more is talent resource. Nearly 900 million out of the 1.4 billion Chinese are of working age and on average have received 10.9 years of education.”

Notwithstanding the statistical argument and the Chinese view, I have always emphasized on the need to focus on demographic accountability also, while accounting for the demographic dividend. No demographic dividend could accrue to us if we fail to give equal importance to demographic accountability also.

If I may reiterate, what I have been saying for the past many years.

Numerous fables have been narrated to eulogize the demographic characteristics of India. Many themes and strategies have been built around the young demographic profile of 1.25bn Indians. Almost all these stories and strategies recognize the young Indian as a great opportunity - "Demographic dividend" for the Indian economy. I have however not come across any presentation that classifies this demographic profile as the solemn accountability and responsibility of India to the world.

The global community has always valued resource rich nations and expected them to behave in a responsible manner to preserve the global order. The capital rich western world has been expected to help the poor and starved of the world. The world looked forward to them to fund technological advancement, preservation of cultural heritage, assisting global growth and development. Even after taking full cognizance of the allegations of imperialism and suppression, I believe that financially rich communities have worked for the betterment of human life by funding technological innovation, life science research & development, productivity enhancement, and development assistance to the economically lagging world.

Similarly, nations rich in natural resources like minerals etc. have been expected to prospect and exploit these resources in optimum manner to assist the sustenance and growth of the global economy.

The point is that since India now possesses the largest pool of prospective workers for the world, should it not be the responsibility of the government to prospect, grow, and develop this resource for the benefit of the global community!

This is even more pertinent in the context of the current global financial conditions. In places like Europe and Japan the root cause of the crisis could be traced to the aging demographic profile. China is also likely to join the club soon. Under the circumstances it is the responsibility of India to provide educated, skilled and trained workforce to the global economy.

A number of research papers and surveys have shown that (a) Child and mother nutrition level in India is sub-standard consequently child mortality rates are poor; (b) higher and professional education standards are extremely poor consequently a large number of Indian graduates are unemployable even in routine jobs; (c) There is acute shortage of competent scientists to scale up research and development (R&T) activities to make Indian businesses competitive at global stage.

"Skill India" and "Make in India" are noble ideas for human resource development. But we need to make sure that these do not end up prospecting and developing only blue collar low skilled workers. In that case India will not only fail in its responsibility to the global community but also slither back into the lower orbit of economic development like in 1950-80.

Saturday, November 20, 2021

Opportunities in the Demographic shift

 The “Young India” may soon begin to age. As the era of demographic dividend wanes, many new business and investment opportunities may arise. It may be the right time for investors to anticipate these opportunities and begin taking positions.

Presently, India is home to the largest number of youth. With close to half of her 1.4bn people below 24yrs of age, India is like a vast reservoir of youthful energy. However, this distinction might not last for long. India is expected to become a middle aged country in next 15years and an old country by 2050 - since with the faster economic development over past three decades, India has managed a consistent decline in crude birth rate (CBR), total fertility rate (TFR) & infant mortality rate (IMR); and improved healthcare facilities, better access & improved affordability have also resulted in a consistent rise in life expectancy of an average Indian to about 70yrs.

As per a 2019 report of the Technical Group on Population Projections for India and States 2011-2036, set up the Government of India, the below 24yr population is expected to fall from 50.1 percent in 2011 to 34.7 percent by 2036. The average age of Indians is expected to be of 34.7 years in 2036 as compared to 24.9 years in last census (2011).



TFR is expected to decline to 1.73 by 2036, much below the ideal replacement TFR of 2.0. This implies that Indian population will begin to grow “old” at a faster rate. Over the next 15yrs, the population of India is likely to witness material rise in the number of old people (60yr and above) and number of potential workers (15 to 59yrs), while the school going children (5-14yrs) will decline materially.

By 2036, the share of old people in the total population may increase to 15 percent (230 million) from 8.4 percent (100 million) in 2011; the number of potential workers is expected to rise to 65.1 percent from 60.7 percent in 2011; and the school going population may decline to 14.9 percent from 19.3 percent in 2011.

It is critical to note that the regional demographic imbalances shall continue to exacerbate in future. By 2036, about 23 percent of the population in southern state of Kerala may be old, as compared to just 12 per cent in northern state of Uttar Pradesh. The median age in the Eastern State of Bihar is expected to be 28.1yrs in 2036 (19.9yrs in 2011), while in the southern state of Tamil Nadu, it would be 40.5yrs (29.9yrs in 2011). Andhra Pradesh may have a CBR of 9.9 per thousand in 2036 (15.2 in 2011) whereas Bihar’s CBR may be 19.6 (27.5 in 2011).

With the projected rise in population to 151bn by 2036, the density of population shall also increase to 462 people per square kilometer from the present 368 people per square kilometer. This shall lead to further acceleration in the trend of urbanization of India. Of course, the urbanization trend will not be uniform across India. Delhi and Kerala will lead with 93-100 percent urbanization rate, with Tamil Nadu, Telangana, Gujarat, Maharashtra, Karanataka etc following with 50-60 percent; whereas Himachal, Bihar, Assam and Odisha will lag with 10-20 percent urbanization rate.


This rise in the urbanized population of middle age and old shall create tremendous new business and investment opportunities in India over next 3 decades, especially over next 15 years.

With the decline in number of school going children, the focus will shift from primary and secondary education to higher education and skill building. Beside more parents will be available for working. Skilling and managing this new set of workers could be a good business opportunity.

The global experience suggests that rise in middle ages urbanized working population invariably results in rise in demand for civic amenities like housing, public transport, sanitation, communication etc.; recreational activities like entertainment and travel; personal use items like clothing, footwear, cosmetics and fashion accessories; and consumer durables etc. Rise in demand for healthcare, social & financial security, elderly care etc. is a natural corollary of the aging demography. The age related pharmaceuticals and devices, chronic disease management, pension management, nursing care, estate planning, old age homes, usually see significant rise in demand as the demographics shift to the higher age. Obviously, we shall see sustainable investment opportunities arising in these areas over the course of next few decades.

Personally, I believe that the demographic shift in India offers immense opportunities in the financial services segment. The demographic changes shall inevitably result in significant widening and deepening of the financial services. With the evolution of earning, savings and spending patterns, the financial product mix, design and their delivery will also have to evolve. Significant opportunity shall arise in the businesses like financial planning, lending, insurance, asset management, etc.

Wednesday, June 16, 2021

The time for Population Control Law lapsed long ago

 One of the few positives of Covid19 pandemic induced lockdown is the rise in birth rate in the Parsi communities. Reportedly, 61 babies were born to Parsi couple in the year 2020. The central government is motivating Parsi couple to increase their birth rate through Jiyo Parsi scheme. Regardless, it is highly unlikely that Parsi community in India may survive to see 22nd Century, as their population continues to dwindle consistently. The fertility rate of parsi community is now close to 0.5, much below the replacement rate of 2.1, that is needed to keep the population constant. Amongst other minorities the fertility rate of Sikhs and Jains is also materially below the replacement rate as reflected in the decline in their population.

I am mentioning this because of two reasons – (i) the latest popular narrative of population control law; and (ii) the fading prospects of demographic dividend of India, that has formed the basis many investment and business strategies.

As per various estimates, the fertility rate of India has already fallen to 2.1 in 2020 from 4.5 in 1981. The replacement rate in India could be 2.2 (against international standard of 2.1) due to still high child mortality rate, the present fertility rate. Which means the population growth rate of India may have already peaked, or may peak in next 4-5years. The other things remaining the same, the youth character of Indian demography may begin to change in 2030s and the prospects demographic dividend may exhaust in two decades. The talk of a population control law at this stage is as ridiculous as it could be.

The proponent of the population control law are purportedly arguing that Muslim population is growing faster than the Hindu population hence a law is needed to maintain the demographic balance in the population.

This contention needs to be tested with the some facts. As per the census data of 2011, the fertility rate of Hindu women had declined from 3.2 in 2001 to 2.2 in 2011, a decline of 1.0; whereas for Muslim women it had declined from 4.1 in 2001 to 2.7 in 2011. The decline in fertility rate in the 2001-2011 was much sharper in Muslim women as compared to Hindu women. The same is true in case of Hindu backward classes and scheduled caste also. It is estimated that post implementation of Right to Education Act, and a slew of incentive schemes to promote education of minority and underprivileged girls, the literacy rate has improved further amongst Muslim and SC girls. This will certainly reflect in further decline in their fertility rate in 2021-22 census. The census of 2021-22 may explode the myth about disproportionate rise in Muslim population.

In my view, this is high time we focus on exploiting the remaining demographic dividend and maintaining the fertility rate at replacement ratio, rather than wasting time and energy on population control law. We need to learn from Chinese experience, which is now incentivizing people to produce more children.

The balance that needs to be urgently maintained is the regional demographics. The fact is that the population in southern and western states has already to decline. It is the North & Central India (UP, MP, Bihar, Rajasthan, Jharkhand and Chhattisgarh) and north east India where the population growth is happening. These are the areas where most youth population is located, while the most employment opportunities are happening in South and West. This is leading to massive migration of workers from central and North India to the South and West, leading to demographic changes in these states. This is bound to become a cause of civil unrest sooner than later. Especially when the delimitation exercise for parliament seats happens in 2031, the more populous states will get disproportionately high representation in the parliament at the expense of southern and western states. This may cause immense resentment amongst the losing states. More states may follow the Maharashtra example for local reservation and restriction on migrant labour. North vs South and East vs West divide would be more harmful to India Story than the ratio of Hindu and Muslim in the population.

Besides, as I have always been highlighting that the imbalanced economic growth in India needs to be corrected fast by creating meaningful employment opportunities in the most populous states; which incidentally happen to be the poorest also.

The reverse migration of labour back to home states due to lockdown is an opportunity that needs to be fully exploited. A strategy must be worked out to keep this labour home, while incentivizing the industrialized states to invest more in automation to compensate for the loss of labour.

Estimates of TFR for all religions, Hindus, and Muslims across states (excluding Jammu & Kashmir) from Census 2011, and comparison with Census 2001 estimates



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Wednesday, July 8, 2020

Demographic dividend dissipating fast

A recent survey report released by the census office of India highlighted many important characteristics of the latest Indian demographics. As per the report, now more than half the population across segments (rural, urban, male, female) is above the 25yrs of age. With the steady fall in fertility rate and rise in life expectancy, the share of young population in Indian demography is declining steadily.
The key highlights of the data could be listed as follows:
  • The Sample Registration System (SRS) in India is carried out by the Office of Registrar General & Census Commissioner, India with an objective of providing reliable annual estimates of birth rate, death rate, infant mortality rate and various other fertility and mortality indicators. SRS is one of the largest demographic surveys in the world covering about 8.1 million population. It serves as the main source of information on fertility and mortality both at the State and National levels.
  • Presently two third (66%) of India's population is in working age (15-59yrs), whereas only 8.1% population is retirement age (60+yr). Working age population is higher in urban areas (69.1%) as compared to rural areas (64.5%).
  • Total fertility rate for the country is 2.2; but the urban rate (1.7) is much lower than the rural rate (2.4). At prime fertility age (25-29yrs) also the urban rate (119.1) is much lower than the rural rate (160.1).
Total Fertility Rate = he number of children who would be born per woman (or per 1,000 women) if she/they were to pass through the childbearing years bearing children according to a current schedule of age-specific fertility rates. It is commonly believed that a total fertility rate of 2.1 is ideal. If this rate is maintained for sufficiently long period, each generation will exactly replace itself. A lower rate will result in decline in population over a period. Italy (1.47); South Korea (1.29); Poland (1.38); etc are some of the countries facing low TFR.
  • The fertility rate has shown remarkable decline with the level of education. For illiterate its is 3.0 while for literate it averages 2.1. For graduate and above it has declined to 1.7.
  • Mean marriage age for the country is 22.3yr. There is not much difference between the rural marriage age (21.8yr) and Urban marriage age (23.4yr).
  • Uttar Pradesh has the highest birth rate (29.3) while Kerala has the lowest birth rate (11.9). (Birth Rate = Children born per 1000 population)
  • Chhattisgarh has the highest death rate (8.9) and J&K has the lowest death rate (4.5).
  • MP has the highest infant mortality rate (54), while the Kerala has the lowest (7).
  • Overall infant mortality rate has shown significant improvement from 2013 (40) to 2018 (32). Despite this decline, one in every 31 infants at the National level, one in every 28 infants in rural areas and one in every 43 infants in urban areas still die within one year of life.
  • The sex ratio at birth has however not shown much improvement in this period. Overall sex ratio at birth has worsened from 905 (2013) to 899 (2018). Chhattisgarh has reported the highest Sex Ratio at Birth (958) while Uttarakhand has the lowest (840).
The data clearly points towards the following five things:
(i)    The government, businesses and society need to rush to reap the much talked about demographic dividend.
(ii)   The talk about a national population control policy at this point in time is totally redundant and could be counterproductive.
(iii)  In next 10-15years we may have significant rise in dependent population due to old age, unemployment and skill redundancy.
(iv)   The poor eastern and central states account for the highest population below 25years of age. Whereas the southern and western states which are relatively more developed  account for the least proportion of young population. This essentially means, we shall see some of the following prominent trends in next 10-15years
(a)   Large scale migration of labor intensive industry from southern and western states to the eastern and central states.
(b)   Large scale migration of skilled and semi skilled workers from eastern and central India to the other parts.
(c)    Relatively much higher rate of investment, savings, infrastructure development, urbanization, industrialization and economic growth in the eastern and central states as compared to the richer southern and western states.
(d)   Eastern and central states gaining significant clout in the national politics. At present the relatively poor eastern and central states send the largest contingent to the parliament, but the power is mostly exercised by the relatively richer western and southern states.
(v)    Failure to materially increase investments in the development and growth of the young but poor eastern states immediately may push Indian economy permanently into lower middle class orbit.
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Thursday, January 23, 2020

Unemployment ...before it become unmanageable



Two piece of information regarding the employment condition in the country came to my notice yesterday. The first piece was encouraging. The latest data released by the Employees State Insurance Corporation says "A whopping 19.6 lakh new employees were added to the payroll of Indian companies in November 2019. This is the second highest monthly addition of new employees in the formal sector after 19.86 lacs addition in July 2019.
The second piece of information was rather disturbing. As per the latest release of the Centre for Monitoring Indian Economy (CMIE), the employment rate in the country rose to 7.5% during September - December 2019 period. Reportedly, this is the highest rate of unemployment in 45 years. The unemployment has recorded consistent increase since 2017 (post demonetization).
As per the CMIE data release:
(a)   The unemployment in the urban areas is at 9%, much higher than the rural areas and the national average.
This could be due to two factors: (i) lower economic activity in the industrial sector; and (ii) high incidence of disguised employment and under employment in the rural areas.
(b)   The unemployment rate in the urban youth, especially educated one, is very high. While youngsters in the age group of 20-24 years reported an unemployment rate of 37%, graduates among them reported a much higher unemployment rate of over 60%. The average unemployment rate for graduates during 2019 was 63.4%. This trend is alarming but correlates well with the multiple waves of urban youth unrest in the country during past few years.
This trend may be interpreted in the following three ways:
(i)    Not enough quality jobs are being created in the formal sector. Most of the new jobs that are being created are low paying and do not require technical or professional skills.
(ii)   The quality of education is deteriorating faster. More and more grduates passing out of colleges are actually unemployable.
(iii)  The economic growth is becoming much less employment intensive due to higher use of technology.
In whichever way we interpret the data, the fact can no longer be denied that unemployment of youth is perhaps the most serious socio-economic challenge India faces presently; and it needs to be addressed before the things become unmanageable.
In my view, urgency of the problem must be understood from the following three dimensions.
1.    A large part of the fabled India story is built upon the "demographic dividend". Unless the youth of the country could be employed productively, this dividend could not be exploited. In two decades, India shall begin to grow old. Unless we exploit this demographic divided today and create enough wealth for the future, it will be very tough for Indian economy to sustain even marginal rate of growth in 2040s and 2050s.
2.    Being the home of the largest number of youth population in the world, it is fiduciary responsibility of India to nurture, protect and grow this invaluable resource as a trustee of humanity.
3.    Persistent unemployment of youth could potentially push our youth towards crime and drugs and turn our nation into a land of uber chaos, much worse than what we have seen in many Latin American countries.