Daily Current Affairs : 17-January-2025
India is experiencing a significant demographic shift, which will have a profound impact on its economy. According to a report by McKinsey & Company, the country is on the brink of a demographic transformation, with its population ageing rapidly. By the 2050s, India’s support ratio, which compares the working-age population to the elderly, will resemble that of advanced economies. This shift signals that India’s young population advantage may be diminishing, bringing both challenges and opportunities for the country.
Key Highlights of the Report
- Economic Growth and Demographic Dividend
India’s demographic dividend, the economic growth potential derived from a larger working-age population, has significantly contributed to its GDP growth. Between 1997 and 2023, this dividend added 0.7 percentage points annually to GDP per capita. However, by 2050, this contribution will decrease to just 0.2 percentage points per year, as the country faces an ageing population. - Rising Dependency Ratio
The ratio of working-age individuals to seniors is also set to decline. In 1997, India had 14 working-age individuals for every senior aged 65 or older. By 2050, this ratio will fall to 4.6 workers per senior, and by 2100, it will drop further to just 1.9, similar to Japan’s current situation. - Female Labor Force Participation
Female labor force participation remains low in India, at just 29% among women aged 20-49, compared to 50-70% in other emerging economies and 74% in high-income countries. Increasing female participation in the workforce is essential to mitigate the economic challenges posed by an ageing population.
India’s Population Trends
India’s fertility rate, currently at 1.98 children per woman, is below the replacement rate of 2.1. As per UN projections, India’s population will peak at 1.7 billion in 2061 before gradually declining. By the end of the century, India is expected to have more than twice the population of China. The share of people aged 60 and above will increase from 10.5% in 2022 to 20.8% by 2050.
The Ageing Challenge
As the population ages, the number of elderly people will grow rapidly. For instance, the population of those aged 80 and above is expected to increase by 279% between 2022 and 2050. This group will predominantly consist of widowed and dependent women, putting pressure on India’s social and healthcare systems.
Addressing the Challenges
To tackle the economic consequences of demographic shifts, India must focus on several measures:
- Boost Female Workforce Participation
Encouraging more women to join the workforce can help counter the decline in the working-age population. Gender equality in employment is crucial for economic growth. - Education and Skill Development
India must address its education and skill gaps. Many young people are educated below the secondary level, and only a small percentage have access to vocational training. Programs like the Skill India Mission can help bridge this gap. - Employment Creation
The country must create jobs for the millions of young people entering the labor market each year. Initiatives like Make in India and Atmanirbhar Bharat aim to create new employment opportunities through domestic manufacturing and industrial growth. - Healthcare and Digital Infrastructure
Improving healthcare access through programs like Ayushman Bharat and expanding digital infrastructure via initiatives like Digital India will help support an ageing population and create new opportunities for the younger workforce.
Important Points:
Demographic Shift: India is undergoing a demographic transformation with a rapidly ageing population, projected to have a support ratio similar to advanced economies by the 2050s.
Economic Growth: India’s demographic dividend added 0.7 percentage points annually to GDP growth from 1997 to 2023, but this will decline to 0.2 percentage points by 2050.
Rising Dependency Ratio: By 2050, India’s working-age to senior ratio will drop from 14:1 (in 1997) to 4.6:1, and by 2100, it will be 1.9:1, similar to Japan’s current ratio.
Female Labor Force Participation: Women’s participation in the labor force is low (29%), compared to 50-70% in other emerging economies and 74% in high-income countries.
Fertility Rate and Population Growth: India’s fertility rate is 1.98 children per woman, below the replacement rate of 2.1, and the population will peak at 1.7 billion in 2061 before declining.
Ageing Population: The share of people aged 60+ is projected to rise from 10.5% in 2022 to 20.8% by 2050, with the 80+ population growing by 279% between 2022 and 2050.
Employment Challenges: India needs to create jobs for the 7-8 million youths entering the workforce each year, as youth unemployment has surged in recent years.
Skill and Education Gaps: Over two-fifths of India’s youth are educated below the secondary level, and only 4% have vocational training. Education reforms and skill development programs are needed.
Recommendations:
- Increase female workforce participation.
- Enhance education and skill development through initiatives like the Skill India Mission.
- Create jobs via initiatives like Make in India and Atmanirbhar Bharat.
- Improve healthcare and digital infrastructure to support both the young and ageing populations.
Why In News
A report by McKinsey & Company highlights that India is on the verge of a significant demographic shift, with its population ageing at an accelerated rate. By the 2050s, India is projected to have a support ratio comparable to advanced economies, indicating a shift from a youthful workforce to a more dependent elderly population, which will present both challenges and opportunities for the country’s future.
MCQs about India’s Demographic Shift and Its Economic Implications
-
How does female labor force participation in India compare to other countries?
A. It is higher than in high-income countries.
B. It is around the same as in other emerging economies.
C. It is lower than in other emerging economies and high-income countries.
D. It has no significant difference.
-
What is one of the key recommendations to mitigate the economic consequences of India’s ageing population?
A. Increase male labor force participation
B. Increase female labor force participation
C. Reduce youth employment rates
D. Focus only on industrial growth
-
Which initiative aims to boost domestic manufacturing and create jobs in India?
A. Digital India
B. Skill India Mission
C. Make in India
D. Start-up India
Boost up your confidence by appearing our Weekly Current Affairs Multiple Choice Questions
