Demographic dividend

Official circles have been very enthusiastic on India entering the cusp of the demographic dividend,. They project decades of high growth with a younger work force supporting a lower proportion of retirees compared to other countries.

The IMF and Bank Indonesia had asked me a few years ago to speak on the demographic dividend in India in the long run. Working on the algebra of projection models, it was clear that they derived demographic dividends from ‘inevitable’ consequences of fertility patterns, age structure of populations and the labour force and savings consequences. Structural differences were high, but economic consequences were not so striking. For example, in India four workers would support one retiree, but in Japan only one in 2050. But which of the results are robust and why? Some consequences may be correct, but for wrong reasons.

The positive future is not inevitable, even though the perception of population and human resource development issues as central is correct. Dividends will be garnered, but only by the brave who have an operating strategic vision of HRD parameters.

If you don’t have a good nutrition, health or education profile, the demographic consequences could be a nightmare. But during demographic transition, there can be another kind of bonus, which is normally ignored. Women would add to the growth rate in a higher manner if we have sound policies instead of sexist bias. This works as follows: the time spent by women in bearing and raising children falls, mortality declines and the lifespan lengthens.

The great Indian demographer Mari Bhat estimated that when the demographic transition nears completion, in India the age at the first birth would be 21-22 years (less than 20 now) and the age at last birth would be around 28 years (38 now). Women could then be expected to enter the labour force in large numbers. Consequently, the growth rate of the labour force would remain higher than the growth rate of total population for an extended period of time. The significance of this ‘deferred bonus’ could be higher than the immediate benefits of the dividend from age structure changes.

Now it is obvious that our policies militate against this dividend. The NSS survey for 2012-13 showed a rise in the drop-out rates of rural females from schools. Instead of solving real problems, Delhi policy advisers are happy at abstract theories contraindicated by evidence. An employment guarantee was close to Mari Bhat’s heart. It was to be integrated with a ‘minimum needs’ strategy. There is the argument that there should be employment guarantees only in poor districts and not in agriculturally developed ones. This is wrong. A wage floor in rural areas acts as an incentive for widespread technological modernisation and better land use. It is not accidental that the agricultural revolution in Europe took place only as real wages started rising in the 19th Century. A recent example in Punjab is a small machine which removes the chaff and prepares the soil for the next crop in a matter of days. It has become necessary with fewer migrants from UP and Bihar coming in.

There is more widespread and compelling evidence in recent studies. A fairly large ICRISAT field survey by Bhattarai showed that in developed districts, successful MNREGA programmes have led to a flurry of investment on the farm. Food security and employment strategies are an integral part of a development strategy and need planning coordination.

The planning function cannot be eliminated, and for a country at India’s stage of development in a world economy that is rapidly changing, the planning function will only grow in importance.

The writer is a former Union Minister

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