The curious paradox of India’s demographic dividend

India is home to more than 600 million people aged between 18 and 35, with 65% under the age of 35. India's demographic dividend is expected to persist at least until 2055–56 and will peak around 2041, when the share of the working-age population — 20-59 years — is expected to hit 59%. To give some statistics in the third largest startup ecosystem in the world, there were more than 90,000 startups in 2022 as against less than 1,000 in 2016. India now has over 100 unicorns. Over the years, these unicorns have raised over $94 billion in funding and have a combined valuation of $344 billion. Around 68 per cent of India’s population comprises working age individuals between the ages of 15 and 64, a demographic dividend that has the potential to generate very high economic growth, provided the country can create productive employment opportunities for its large working age population. But data from labour force surveys indicates that this is a big challenge for the economy at present. Some 45 per cent of the workforce continues to toil on farms in the agricultural sector, while in the non-agricultural sector, 74 per cent of workers are employed in low-paying informal work in microenterprises. Indeed, among young people aged between 15 and 29 years, approximately 28 per cent are engaged as ‘unpaid helpers in household enterprises’. And here too, the agriculture sector remains the principal source of employment, accounting for 36 per cent of employed youth.

India will need a radical reorientation of its growth strategy if it is to address the challenge of productive job creation and harness its demographic dividend, making the growth process more employment-intensive. The Indian experience shows that growth alone cannot be the principal instrument of job creation, as it is the sectoral composition of growth that determines the quantity and nature of employment opportunities created. India’s idiosyncratic structural transformation from agriculture to services — leapfrogging the phase of manufacturing growth — has generated limited opportunities for well-paid employment for those at the lower end of the education and skills ladder.

But data from labour force surveys indicates that this is a big challenge for the economy at present. Some 45 per cent of the workforce continues to toil on farms in the agricultural sector, while in the non-agricultural sector, 74 per cent of workers are employed in low-paying informal work in microenterprises.

Indeed, among young people aged between 15 and 29 years, approximately 28 per cent are engaged as ‘unpaid helpers in household enterprises’. And here too, the agriculture sector remains the principal source of employment, accounting for 36 per cent of employed youth. India will need a radical reorientation of its growth strategy if it is to address the challenge of productive job creation and harness its demographic dividend, making the growth process more employment-intensive. The Indian experience shows that growth alone cannot be the principal instrument of job creation, as it is the sectoral composition of growth that determines the quantity and nature of employment opportunities created. The idiosyncratic structural transformation from agriculture to services — leapfrogging the phase of manufacturing growth — has generated limited opportunities for well-paid employment for those at the lower end of the education and skills ladder.