Hindu Editorial Analysis : 2-July-2024

The International Monetary Fund (IMF) has recently highlighted the importance of investing in education and health for India. With a large and young population, India has a unique opportunity to enhance its economic growth. This essay discusses the concept of demographic dividend and the urgent need for investment in education and health to fully realize this potential.

Understanding the Demographic Dividend

The term “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 (ages 14 and younger or 65 and older). This change in age structure typically occurs due to declines in fertility and mortality rates.

Key Areas for Demographic Dividend

Countries can harness demographic dividends in several ways:

  • Savings: Increased personal savings can stimulate economic growth.
  • Labour Supply: More individuals, including women, join the workforce.
  • Human Capital: With fewer children, parents can invest more in each child’s education and health.
  • Economic Growth: A lower dependency ratio boosts GDP per capita.

India’s Current Situation

India is currently experiencing a demographic dividend that is expected to last until 2055. Between 2020 and 2050, an additional 183 million people will enter the working-age group. However, for this potential to translate into economic growth, India must invest significantly in education and health.

Need for Investment in Education and Health

According to the IMF, prioritizing investments in education and health is essential for maximizing the benefits of the growing workforce. The current labour force needs to develop skills to compete effectively in a rapidly changing job market influenced by AI and other technologies.

Current Economic Landscape

India’s growth has been supported by public investment and private consumption. While public spending has positively impacted growth, private investment remains weaker. The IMF forecasts a growth rate of 6.8% for India in FY 2024/25, despite high youth unemployment rates, which exceeded 40% in 2022-23.

Challenges and Associated Risks

India faces several challenges that hinder its ability to fully utilize its demographic dividend:

  • Lack of Job Creation: The World Bank has warned that job creation in South Asia, including India, is falling short of the growing workforce.
  • Low Employability: A significant portion of graduates lacks the skills needed for employment. Reports indicate that only 20-30% of engineers find jobs suited to their qualifications.
  • Skill Transition: The shift from an agrarian economy to a non-agrarian one poses challenges in reskilling the workforce and relocating workers to urban areas.
  • Health Crises: The large population complicates efforts to address health challenges and manage macroeconomic shocks.
  • Gender Disparity: While there has been progress in gender equality, challenges remain that hinder women’s full participation in the workforce.

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, emphasizing that these investments are vital for harnessing the country’s demographic potential and promoting sustainable economic growth.

MCQs about India’s Demographic Dividend: The Need for Investment in Education and Health

  1. What does the term “demographic dividend” refer to?
    A. A decrease in the population
    B. Economic growth potential from a larger working-age population
    C. Increased birth rates
    D. High unemployment rates
    Correct Answer: B. Economic growth potential from a larger working-age population
    Explanation: The demographic dividend refers to the economic growth potential that arises when the share of the working-age population is larger than that of the non-working-age population.
  2. According to the IMF, what should India prioritize to benefit from its demographic dividend?
    A. Infrastructure development
    B. Investment in education and health
    C. Export promotion
    D. Tax cuts
    Correct Answer: B. Investment in education and health
    Explanation: The IMF emphasizes that significant investments in education and health are crucial for ensuring that India’s growing young population is adequately employed and can compete in a modern economy.
  3. What is one of the challenges India faces in utilizing its demographic dividend effectively?
    A. Excessive job creation
    B. High fertility rates
    C. Low employability among graduates
    D. Decrease in working-age population
    Correct Answer: C. Low employability among graduates
    Explanation: A significant challenge is the low employability of graduates, with many lacking the necessary skills for available jobs, which hinders the effective use of the demographic dividend.
  4. What impact does a lower dependency ratio have on a country’s economy?
    A. Decreases GDP per capita
    B. Increases GDP per capita
    C. Leads to higher unemployment
    D. Reduces personal savings
    Correct Answer: B. Increases GDP per capita
    Explanation: A lower dependency ratio means there are more working-age individuals compared to dependents, which can lead to increased economic productivity and, consequently, higher GDP per capita.

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