'There Are Really Two Different Indias'

'Over the next 20 years, we would be adding almost 10 million people to the workforce every year!'
'And we won't be able to give employment to even 2 million out of the 10 million every year.'
'Don't forget, it keeps adding every year.'

India is said to be one of the youngest major economies in the world with 40% of the population below the age of 25 and 65% below the age of 35.

India's median age of 28 years is much lower than that of China and US (38-39) and Japan (49).

India is also a country where youth unemployment at 45% is among the highest in the world.

According to the Periodic Labour Force Survey (PLFS) for 2022-2023, India's female labour force participation rate (FLFPR) is only 37% -- only about half as much as in China's.

The fertility rate for India in 2022 was 2.1 births per woman while it is 0.75 in Hong Kong, 0.88 in South Korea and 1.30 in Japan.

But the total fertility rate in India is projected to decline to 1.73 by 2036. It means, very soon India also will have a lot more elderly people.

The question is, is India ready for the demographic change?

Dr Anil B Deolalikar, who is the Professor of Economics and Founding Dean Emeritus of the School of Public Policy at the University of California, Riverside, recently published a detailed study on the Demographic changes in India: Implications for policy (external link).

"At the end of the day, India becoming a third or the fourth largest economy is meaningless if the living standards of people are poor, if the per capita income is low. In India, the per capita income is very low. India is really a low, middle-income country," Dr Deolalikar tells Rediff.com's Shobha Warrier in the concluding segment of a two-part interview:

• Part 1 of the Interview: 'We Are Frittering Away The Demographic Dividend'

If you take the economic growth of India, there is a sharp difference between how it is in the southern and western part of India and the northern part of India.
Along with this, while the fertility rate is quite low in the southern states like Kerala and Tamil Nadu, it is very high in states like Bihar, UP, and MP...
Where will this lead to?

In many ways, there are really two different Indias.

I have pointed out in my paper, over the next 20 years, we would be adding almost 10 million people to the workforce every year! And we won't be able to give employment to even 2 million out of the 10 million every year. Don't forget, it keeps adding every year.

And half of the 10 million every year are going to be from the three states of Bihar, UP and Madhya Pradesh. Where are they going to get the jobs?

The jobs are in Tamil Nadu, Maharashtra and Karnataka.

There are virtually no manufacturing jobs in UP and Bihar.

This regional inequality is going to make the problem of unemployment even worse.

When the southern states are well on their way to the demographic transition, the northern and eastern states are far, far behind.

They almost resemble the sub-Saharan Africa. If you look at the fertility rate of Bihar and UP, it is almost as high as Africa.

But if you look at the fertility rate of Kerala, Tamil Nadu and Andhra Pradesh, they are like the South East Asian countries of Thailand, Malaysia, etc.

India is like two different continents in one.

As fertility rate comes down in the southern parts of India, do you think this will lead to more migration from the north to the south?
Even today, the jobs are in the south and labour force is in the north.
So, there is already migration happening for jobs from the north to the south.

The differing rates of fertility decline and economic growth between the two Indias means you will have a surplus of working-age persons, mostly youth, in the East and North but a deficit in the West and South.

This will result in very high levels of youth migration from states such as Bihar and UP to states such as Gujarat, Maharashtra, Tamil Nadu and Karnataka. This is almost inevitable.

It has happened in other middle-income countries like China.

And it even occurred in India when rapid agricultural growth in Punjab and Haryana in the aftermath of the Green Revolution resulted in a large seasonal migration of agricultural labour from Bihar to these two states.

Do you feel youth unemployment is going to make it more and more difficult for India in the coming years?

Yes, it is going to be very difficult for the country.

What is happening now is, the high rate of economic growth is giving people a false sense of feeling that India is doing very well. You read every day about India becoming the third largest economy in the world, India overtaking Japan soon, etc.

But at the end of the day, India becoming a third or the fourth largest economy is meaningless if the living standards of people are poor, if the per capita income is low.

In India, the per capita income is very low. India is really a low, middle-income country.

The human capital in India is very poor.

You wrote in your paper, to take advantage of the demographic dividend, the country will need to invest heavily in the human capital of its children, who will be entering the workforce in large numbers over the next few decades. ..

That is, investment in education, health and nutrition.

I will not say it is not happening; it is happening but at a very slow rate.

The latest data from the National Family Health Survey show that roughly a third of all children below 5 are underweight and stunted.

These children are going to be the workers of tomorrow.

How can we expect them to be productive workers if they lack basic nutrition and do not even have basic numeracy and literacy skills by secondary school age?

India will not remain young forever. Though we have only 6.1% of the population above the age of 65 now unlike the 28% in Japan, in another couple of decades, India will have a lot more elderly people. Is the country ready for that eventuality?

You are right. Even though we are a relatively young population as of now, the fertility rate decline that has been set in motion means that the population will start aging soon.

The median age is predicted to be around 37 by mid-century and 46 by the end of the century. This doesn't fully convey how rapidly the country's elderly population will grow.

The population aged 60 years and older currently stands at about 140 million, while that aged 65 years and older is 90 million.

The 60+ population is projected to grow very sharply over the next three decades, more than doubling to a level of 320 million by mid-century. Thereafter, it will continue to increase, albeit at a more gradual pace, reaching 450 million by 2075 and 480 million by 2100.

As the country ages, you will see that the health problems of the elderly are much more expensive to treat. You have dementia, diabetes, Alzheimer's, chronic heart disease, etc.

India's expenditure on health per capita is among the lowest in the world.

Despite past policy promises, India's public spending on health is stuck at about 1% of GDP. In contrast, China spends 3% of its GDP on health.

Kerala is already a geriatric society...

Yes. It is not going to be very long before Tamil Nadu and Karnataka also join Kerala in that dimension!

You know how poor our public health infrastructure is currently. We cannot cope with the health problems right now. How can we when it is going to multiply ten folds in the next 20 years which is not very far away?

IMAGE: Dr Anil B Deolalikar

Is it a bleak scenario?

I do not want to sound too pessimistic.

Economic growth can solve a lot of problems. When you have rapid economic growth, the government earns more tax revenues, and can invest more heavily in education, health, and physical infrastructure.

If they do that, the country will be able to face the aging problem, which will come in a big way in the next 20 years.

If not, the result will be disastrous.

You will have continuing growth. But you will have greater inequality.

You will have more unemployed young people looking for jobs.

You will also have more elderly who are not able to support themselves which is already happening in Kerala.

Even China which has started aging very rapidly, is not fully prepared for it. If a more affluent China is facing the problem of aging now, it is going to be much worse for India.

That's why I suggest in my paper that as the problems are formidable, we should not gloat over the high economic growth rate we are witnessing in the last two decades.

We should seize the moment and invest heavily in education, health and employment generation.

Feature Presentation: Aslam Hunani/Rediff.com