India: Young and restless

NEW DELHI: In the backdrop of World Population Day that was observed this week, the United Nations said that as many as 415 million people moved out of poverty in India within just 15 years, from 2005-06 to 2019-21. The latest edition of the global Multidimensional Poverty Index (MPI) said that the incidence of poverty dropped from 55.1.% to 16.4% during the period in India, which surpassed China to become the most populous nation in the world this April, with 142.86 crore people.

A question that crops up when such reports are released is whether India’s large population is advantageous to its economy, or whether its detrimental. This query invites comparison to our neighbour China, and its progress on the economic and human indices. Experts opine that such comparisons are misleading due to the diametrically opposed policy histories of the nations. China is a significantly wealthier nation than India, despite it being at a disadvantage in terms of population composition — those over 65 make up for 13% of its population, as against 7% in India. However, Beijing is in a much better position to take care of its senior citizens.

So, the question should be whether cumulatively, a younger and larger population is more favourable than an older and smaller population. It’s a relevant issue when you consider the state of nations like Japan and Italy which are incentivising its people to have more children — as the two developed countries are facing a degrowth in population.

Coming back to India, it is a given that a younger population would lead to a proportionately greater share of people in the workforce, which translates into a higher GDP, while maintaining factors like technological advances and the quantum of capital available. The inclination of the youth to save more than the old will result in higher savings and greater investment opportunities. This, of course, could inspire more innovation.

Having said that, the bane of unemployment lurks in India. Stakeholders in the policy space believe the unemployment rate in India has more or less been consistent in the range of 3-5%. However, we are not hostage to unemployment, but underemployment. Reports have shown an encouraging trend as the output per worker is on the rise, along with a surge in the number of people employed, in the post-reform years. But there is a lot more room for accelerating this trend.

One also needs to be aware of the flip side of a larger population, which implies a greater pressure on resources of a finite nature. Nowhere is this pressure more visible than in agriculture, where the quantum of arable land is fixed. India is seeing a long-term trend of depleting size of agricultural land holdings. In 2015, it was reported that about 48% of land holdings had dropped below half hectare in size, and that the average size of the land holdings plummeted to a quarter hectare. Such holdings are uneconomical and stifle the per worker output in agricultural activities.

There is a pressing need for faster migration of workers from agriculture — into the industries and services sector — which take up the lion’s share of employment. A slow transition has led to our economy’s poor performance on several metrics. We must gainfully employ the youth, while they are young — in jobs that can help the nation sustain its progress in the long term. And, a robust economic policy must be the framework on which such success is built.