The 'dividend' does not refer only to the number of people available to work but also to a change in the dependency ratio
Since the 18th century, economic thinking largely focused on the burdens of a large population, but this has changed over the past decade. Harvard economists, David Bloom and Jeffrey G. Williamson wrote an influential paper linking the economic success of East Asian economies to a boom in their working-age population. They said it is possible to attribute as much as one-third of East Asian economic growth between 1965 and 1990, measured in per capita income, to demographic changes. And India could experience something similar over the next 40 years.
The ‘dividend’ does not refer only to the number of people available to work but also to a change in the dependency ratio (the proportion of working-age adults to the number of people too young or too old to work). At present, every 10 people of working age in India need to support close to five children and one elderly person. In another 15 years, those 10 workers will be responsible for well under four youngsters and one elderly person. Young workers will have less to spend on immediate needs like food and clothes for children, and therefore save more which will then create capital to invest in infrastructure, research and technology, providing an economic boost in the process.
Reaping the demographic dividend is not a given, but is possible if the right education and health policies are chosen. India’s huge population has limited advantage if people are not sufficiently educated to take up productive employment, or if there are not enough meaningful jobs to accommodate the millions reaching working age each year.
While India’s growing population can prove to be beneficial, recent data released in the first results of Census 2011 poses a concern. The Census showed an addition of 181 million people in the past decade to reach a total of 1.21 billion along with bringing out the harsh reality of India’s increasing disparity in girl-boy ratio as Indians continue to prefer sons over daughter. Sex ratio among children up to age 6 dropped to 914 girls for each 1,000 boys from 927 a decade ago and is the lowest since the country’s independence as a result of increasing practice of female feticide. Population density in the country increased as well with the area around the Indian capital being the densest reaching 29,000 people a square mile. The population data will release unemployment and job-creation figures at the end of the year which will disclose the country’s readiness to take economic advantage of its youthful workforce through a so-called ‘demographic dividend’ or will demographics prove to be an economic liability for the world's largest democracy.