Why India can’t take its demographic dividend for granted

Subscribe to enjoy similar stories. By its own estimate, the Indian government expects the economy to close 2024-25 with an expansion of 6.4%. That would make India one of the fastest-growing economies, but it’s still some way from maximising its unique demographic moment.

The perils of not being able to do this were highlighted in a recent research report by Saurabh Mukherjea of Marcellus Investment Managers, who pointing to growing indebtedness in the middle class amid flat incomes and the prospect of job losses due to automation. India's unique demographics hold the prospect of a ‘demographic dividend’ –economic growth potential that can result from shifts in a population's age structure. This is measured as the dependency ratio—a country’s dependents (those below 15 years and those above 64 years) as a proportion of its working-age population (15-64 years).

When this figure falls below 50%, as it did for India in 2019 as per the United Nation’s World Population Prospects 2024, the potential for a demographic dividend is said to have kicked in. Over the past 60 years or so, several countries have benefitted from a demographic dividend. Of the eight countries considered here, four posted double-digit economic growth (in nominal terms) over their demographic-dividend period.

Of these four, China, Vietnam and Ireland grew faster than in their previous 10-year period. So far, India has managed neither. Also read | Equity analysis: India’s billionaire boom isn’t a sign of a hunky-dory economy India faces the additional challenge of having the lowest per-capita income in this set.