INDIA’S DEMOGRAPHIC DIVIDEND AS A GLOBAL PUBLIC GOOD

THE CONTEXT: India stands at the cusp of a transformative demographic shift, with its working-age population projected to expand by 9.7 million annually during 2021–31 and 4.2 million annually during 2031–41. By 2030, India will have 1.04 billion individuals in the working-age group, constituting one of the youngest populations globally, with a median age of just 28.4 years compared to aging populations in Europe, the US, and Japan. This demographic dividend gives India an unparalleled opportunity to drive domestic economic growth and influence global labor markets.

THE BACKGROUND-TREAT LABOUR AS GLOBAL COMMON:

• • Traditionally, global commons include non-excludable yet rivalrous resources like oceans or outer space. Similarly, labor can be viewed as a shared resource that transcends national boundaries but is constrained by legal barriers to mobility.
  • Curtailing restrictions on international labor mobility could transform labor into a quasi-public good. Labor would be accessible across borders without stringent immigration controls, and the influx of skilled workers into labor-deficient economies would enhance productivity and welfare globally.

IMPLICATIONS FOR GLOBAL LABOR MARKETS:

• • India’s demographic dividend is not just a domestic phenomenon but has significant implications for global labor markets. As advanced economies like the US, EU nations, and Japan grapple with aging populations and shrinking workforces, India emerges as a critical supplier of human capital.
  • Europe faced over one million job vacancies in 2023 despite an unemployment rate of 5.9%, highlighting skill mismatches.
  • Australia reported 400,000 unfilled positions in healthcare and logistics amidst a 4.1% unemployment rate.
  • The country already contributes significantly to global services exports, particularly in ICT and software services, which accounted for 4.6% of global services trade. India’s large pool of STEM graduates positions it as a solution to the skill mismatch in developed economies.

INDIA’S DEMOGRAPHIC ADVANTAGE:

India’s dependency ratio—the proportion of dependents (children and elderly) to the working-age population—is steadily declining and is expected to reach its lowest point by 2030. By 2030, India’s dependency ratio will be among the lowest globally at approximately 49%, compared to over 60% in many developed nations.

INDIA’S SKILLED WORKFORCE POTENTIAL:

• • Growth in ICT and Software Services Exports: According to the Reserve Bank of India (RBI), India’s software services exports reached $205.2 billion in FY24, a 2.8% increase from the previous fiscal year. The United States remains the largest destination for these exports, accounting for 54% of the total, followed by Europe at 31%.
  • Comparative Advantage in Skilled Labor: India’s comparative advantage in skilled labor stems from its large pool of educated professionals, particularly in STEM fields. 42.7% of STEM graduates in India are female, higher than the US (34%) or Germany (27.6%). The country contributes around 4.6% of global services exports and is recognized for its ability to deliver high-quality talent at competitive costs. Indian doctors and nurses are highly sought after globally, especially in countries like the UK and Gulf nations.

THE CHALLENGES:

• • Domestic Skill Mismatch in India: According to the World Economic Forum (WEF), just 25% of management professionals, 20% of engineers, and 10% of general graduates meet industry standards. The Global Skills Gap Report (2023) by the International Labour Organization (ILO) highlights that 47% of Indian workers are underqualified for their jobs, with women disproportionately affected (62% underqualified).
  • Vocational Training and Curriculum Reforms: Only 2.3% of the workforce has received formal vocational training, compared to 52% in the US and 75% in Germany. The National Sample Survey (NSSO) 2018 revealed that only 2.3% of the population aged 15–29 had received formal vocational training, while 8% had received non-formal training.
  • Human Capital and Productivity: India ranks among major economies with the lowest GDP per hour due to inadequate skills, low technological adoption, and infrastructural deficiencies. Labor-intensive sectors like textiles and construction suffer from low productivity due to outdated practices.

THE WAY FORWARD:

• • Comprehensive Skilling Ecosystem: Conduct regular assessments to identify sector-specific skill shortages. The National Skill Development Corporation (NSDC) has highlighted gaps in sectors like healthcare and IT. Expand the scope of Pradhan Mantri Kaushal Vikas Yojana (PMKVY) by integrating it with local needs and emerging global trends.
  • Strengthening Vocational Education: Launch awareness campaigns to change societal perceptions of vocational careers. Highlight success stories of entrepreneurs who benefited from vocational training. Increase funding for Industrial Training Institutes (ITIs) and polytechnics under schemes like AMRUT.
  • Facilitating International Labor Mobility: Strengthen agreements like the India-Germany labor mobility pact under the G20 “Skills-based Migration Pathways” framework. Create a national database to map skills with global demand. For example, Kerala’s NORKA Roots program maps emigrants’ skills to Gulf countries’ labor demands.
  • Promoting Gender Inclusion in the Workforce: Encourage flexible hours, work-from-home options, and affordable childcare facilities under schemes like Paalna. Mandate gender diversity reporting under SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework.
  • Enhancing Institutional Frameworks: Partner with international organizations like the ILO to standardize skill certifications globally. Develop robust systems to evaluate the outcomes of skilling programs. The NSDC’s monitoring framework can be expanded for this purpose.
  • Leveraging Technology for Skilling: Under the BharatNet project, invest in high-speed internet connectivity in rural areas to enable access to online skilling platforms. Scale up platforms like DigiSaksham, which offers free digital literacy courses in collaboration with tech giants like Microsoft.

THE CONCLUSION:

India’s demographic dividend is a double-edged sword—if not managed effectively, it can either propel economic growth or exacerbate unemployment. As Dr. Amartya Sen noted, “Development is about expanding freedoms.” Investing in human capital through skilling, inclusion, and institutional reforms will ensure that India’s demographic dividend becomes a global asset rather than a missed opportunity.

UPSC PAST YEAR QUESTIONS:

Q.1 Economic growth in the recent past has been led by increase in labour productivity. Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labour productivity. 2022

Q.2 Earn while you learn’ scheme needs to be strengthened to make vocational education and skill training meaningful.” Comment. 2021

MAINS PRACTICE QUESTION:

Q.1 “Labor as a global public good can address global labor shortages while benefiting India’s economy.” Critically analyze

SOURCE:

https://www.orfonline.org/expert-speak/india-s-demographic-dividend-as-a-global-public-good