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Stagnated Phase of Demographic Transition?

By Unnati Tolani, Edited By Amogh Sangewar

The coronavirus pandemic became India's most significant economic tragedy of all. It amplified the struggles of the Indian economy with regards to employment opportunities, youth training and education, and fertility and mortality rates. The policy measures adopted by the government have caused a downturn in economic activity, resulting in job losses and massive unemployment. In short, the pandemic has largely affected the ‘demographic dividend’ our nation was endowed with.

But, what exactly is demographic dividend? Well, it is a technical term that refers to an economy's growth due to a demographic transition or shift in a country's population's age structure. It is a gradual process that occurs in countries where fertility and death rates are declining. A country's demographic profile is inextricably tied to the fiscal policy's long-term viability and the structure of public expenditure.

During the pre-covid times, India was capable of maximizing its demographic dividend. But, to no surprise, will the Covid-19 pandemic accelerate the process wherein India enters the next phase of demographic transition with jobless growth? Will the young age cohorts be the first to be the first casualty of the vicious state of the labor market? Will the lack of training and education deprive children of their fundamental educational rights?

Think of your child being pushed out of school and suffering from starvation and hunger. This not only has a negative impact on mental health, but it also negatively affects youth development. India is on the verge of ushering in a "pandemic generation" that will suffer far beyond the pandemic itself.

In India, the median age of the population is 28 years, whereas, in Japan, it is 48.6 years and 42 years in China. This demonstrates India's current demographic superiority. However, things are likely to alter in the future. The number might decline to 22 years by 2050, resulting in a demographic transition. It is important to know how these numbers are related to the theoretical concept. The demographic transition theory was given by W. S. Thompson and F. W. Notestein in 1945. It is a structural change of an economy from high mortality and high fertility to low mortality to low fertility. The stages of a demographic transition go from a high birth rate, declining death rate, and rapid population growth rate to a stage where births and deaths are almost equal, and population growth is zero. Since the baby boom arises and the working population cannot outgrow its dependents - children and the older people, the demographic dividend starts disappearing, and a country like India loses its demographic advantage.

However, just like there is light at the end of every tunnel, even a developing country like India can have a demographic edge by rigorously utilizing the demographic transition. It becomes imperative for the government to analyze the core problem and devise appropriate solutions. Only a third of our population is employed, even though two-thirds of our population is of working age. This generates unemployment and underemployment. The drop in the overall fertility rate is substantially to blame for the demographic shift. Talking about the impact of the pandemic, towards the end of 2020, roughly 15 million workers were unemployed.

One cannot get an accurate picture of the critical demographic dividend without looking at the female workforce participation rate. During the lockdown, women in both urban and rural areas experienced significant unemployment. According to the CMIE, 27 million young people aged 20 to 30 lost their jobs in April 2020. Female labor market involvement is minimal due to religious norms. Furthermore, the market's enormous workforce is very unskilled and lacks sufficient training, creating concerns about employability and, subsequently, contribute to the country's high unemployment rate.

Are you wondering if the demographic dividend ensures that India's states remain homogeneous? No, no. In fact, there is significant heterogeneity in the demographic transition at the state level. It is influenced by various policies and schemes launched by the government. Among the wealthier states, Gujarat and Haryana have fallen behind in the vital rate transition and have populations that are significantly younger than their income levels. Delhi is an exception due to internal migration. Compared to the national average, Kerala, Tamil Nadu, and Himachal Pradesh have a much higher proportion of people aged 60 and above. The low-income states of Bihar, Uttar Pradesh, and Jharkhand, on the other hand, have a deficient proportion of their population aged 60 and above, rendering them less vulnerable to pandemics.

Empowering education and skills play a crucial role in the demographic dividend. According to statistics, 28 percent of Indian youngsters are between the ages of 15 and 29. Only a quarter of the young have completed secondary school or are illiterate, and only 13% have earned a bachelor's degree. Only 5.5 million new jobs were produced in the country in 2017-18, although 8 million young people entered the labor market. The pandemic has hindered economic growth and resulted in the fragility of the financial sector.

The young working population faced many obstacles, including a lack of understanding about where and how to look for work, outmoded skills that do not meet labor expectations, and a mismatch between education and job demands. These can be attributed to organizational failure, disorganized labor market, skill imbalances, low incidence of technical training, and demand-driven employment and supply-driven education.

Thomas Malthus argued in 1798 that the human population tends to exceed all possible means of survival, which keeps the world trapped in the vicious cycle of poverty. Therefore, the human population and economic growth are tied in a zero-sum game limited by the availability of food ( Kapoor & Yadav, 2021). Time and again, many Asian countries have proved Malthus wrong as his world was constrained with fixed resources and inadequate technology. However, Malthus's pessimistic approach with the human population seems more exact today than any demographic optimism.

The demographic dividend does not exist in a bubble; it is tied to an economy's demographic transition, which is linked to its structural transition. For example, there is always a shift from primary to tertiary to the manufacturing sector. This was the scenario throughout Europe concerning structural transformation. However, in India, we have experienced a demographic transition rather than a structural one.

Even before covid-19, the unemployment situation had been dreadful for 45 years. The pandemic worsened the situation. Pages after pages have been written, and numerous plans have been developed for how the country will deal with an economic shock. The moment is here. But India is nowhere close to enhancing its economic trajectory.

The impacts of the pandemic on India’s youth threaten to last for years to come, undoing decades of progress on multiple fronts. India’s post-COVID-19 recovery plans must necessarily include efforts to build critical social infrastructure. That would require a massive collaborative effort between the government, the private sector, and various non-governmental organizations.

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