Hindu Editorial Analysis : 20-April-2024
The International Monetary Fund (IMF) has recently emphasized the importance of investing in education and health for India. With a large and youthful population, India has a unique chance to boost economic growth. This essay will explore the concept of the demographic dividend, its significance for India, and the urgent need for investment in education and health.
Understanding the Demographic Dividend
The demographic dividend refers to the economic growth potential that arises when the working-age population (ages 15 to 64) is larger than the non-working-age population (children and the elderly). This shift often occurs due to lower birth and mortality rates. Key benefits of this demographic change include:
- Savings: More workers mean higher personal savings, which can stimulate economic growth.
- Labour Supply: An increase in the number of workers, including more women, enhances the labor force.
- Human Capital: Parents can invest more in each child’s education and health when there are fewer children.
- Economic Growth: A lower dependency ratio can lead to increased GDP per capita.
India’s Demographic Advantage
India is currently experiencing a demographic dividend that is expected to last until 2055. The country is projected to add 183 million people to its working-age population between 2020 and 2050. However, this potential can only be realized with significant investments in education and health, alongside policies that encourage labor force participation.
The Call for Investment
The IMF’s Asia and Pacific Department stresses the need for India to prioritize education and health spending over other types. To harness the demographic dividend, the workforce must be equipped with relevant skills to compete in a rapidly changing job market influenced by technology and automation.
Current Economic Landscape
India’s recent economic growth has been fueled by public investment and private consumption. The IMF forecasts a growth rate of 6.8% for the fiscal year 2024/25, despite a youth unemployment rate exceeding 40% in 2022-23. However, private investment remains weak, which poses a challenge for future growth.
Challenges to Realizing the Dividend
India faces several challenges in leveraging its demographic dividend:
- Lack of Job Creation: The World Bank warns that job creation is not keeping pace with the growing working-age population. Unemployment levels were already at a 45-year high before the COVID-19 pandemic.
- Low Employability: A significant gap exists between the skills of graduates and market needs. For instance, only 20-30% of engineers find jobs that match their qualifications.
- Economic Transition: As the economy shifts from agriculture to non-agricultural sectors, workers must acquire new skills and often relocate to urban areas for employment.
- Health Crises: India’s large population also faces health challenges and macroeconomic shocks, complicating job creation and economic stability.
- Gender Disparity: While progress has been made in gender equality, continued efforts are needed to enhance women’s education and workforce participation.
Why In News
Recently, the International Monetary Fund (IMF) has suggested that India needs to focus on investing heavily in education and health to ensure that its growing, young population is adequately employed, as these sectors are vital for equipping the workforce with the necessary skills to compete in a rapidly evolving global economy.
MCQs about Demographic Dividend
- What does the term “demographic dividend” refer to?
A. The increase in population leading to higher unemployment
B. The economic growth potential from a larger working-age population
C. The decline in fertility rates over time
D. The benefits of high birth rates on the economy
- According to the IMF, what is essential for India to capitalize on its demographic dividend?
A. Reducing public investment
B. Increasing agricultural output
C. Investing heavily in education and health
D. Focusing solely on private consumption
- What challenge does India face in terms of job creation?
A. An increase in birth rates
B. A decline in the youth population
C. Job creation not keeping pace with the working-age population growth
D. High levels of foreign investment
- What is one of the major benefits of investing in education according to the essay?
A. It reduces the number of engineers in the job market
B. It allows parents to have more children
C. It improves the employability of the workforce
D. It increases dependency ratios
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