India’s Youth Need Better Policies To Reap Demographic Dividend

India is on a formidable growth trajectory since liberalisation in 1991. In nominal terms, the economy has grown from USD 275 billion in 1991 to USD 2.7 trillion in 2019 at a CAGR of 8.5 per cent.

In the short term, there is an urgent need to fix the liquidity crisis that has caused an economic slowdown. In the long term — having taken care of most basic necessities — India is undoubtedly in a nation-building mode.

To plan this, it is now more important than ever to understand how our demographics is changing.

Over the last twenty years, India has achieved ~100 per cent enrollment at the primary school level. Table 1 shows the number of children enrolled and the Gross Enrollment Ratios (GER) in primary schools.

GER is the ratio of children enrolled in a particular class to the eligible population in the age group for that class, which is from ages 6-10 for primary schools. The prominent rise of midday meal schemes since 2000 has contributed towards a higher enrollment.

GER can go over 100 — as it has most years since 2001 — when children outside the ages of 6-10 enroll into primary school. What 100+ GERs indicate is that many older students, who had probably missed out on the opportunity to study at the 6-10 age, are joining schools to get an education now.

And 100+ GERs could also indicate that some students are failing to move into secondary school and are being held back. GER peaked in 2010-11 rising up to 115.5, indicating that15.5 per cent more children had enrolled apart from those in the age bracket of 6-10 across India. It has since reduced to ~100.

With ~100 per cent enrollment achieved, it is interesting to note that the number of children enrolled in primary school peaked at 13.98 crore in 2011-12 and has since steadily decreased to 12.91 crore in 2015-16.

This decline corroborates census data that the percentage of children in the population has reduced from 18 per cent in 1991 to 13 per cent in 2011 and may decline to 11 per cent in 2021, as analyzed in our previous article.

MHRD (Ministry for Human Resource Development) data indicates that of 100 children entering Class 1, approximately 80 children move on to Class 10, where approximately 79 per cent pass; of these 56 enter Class 12 where approximately 78 per cent pass the State and Central Board Examinations.

Indications from MHRD’s large database tracking 13 crore children are at odds with surveys by NGOs like Pratham that use thin surveys of 5.5 lakh rural students to suggest that, for example, only 27 per cent of children in Class 8 can read even a Class 2-appropriate text.

Policymakers must use MHRD’s massive database with comprehensive examination pass data to understand the quality of students — both urban and rural — and take steps to improve it.

After Class 12, the number of youngsters entering higher education drops further. AISHE (All India Survey on Higher Education, MHRD) data indicates GER in 2018-19 was 26.3 across India.

AISHE also uses the information from its surveys to estimate the population between the ages of 18-23 — the eligible ages for higher education. Table 2 indicates this number has hardly grown from 14.03 crore in 2011 to 14.2 crore in 2018.

This translates to a CAGR (Compound Annual Growth Rate) of only 0.18 per cent. Low CAGR in this age group is a clear indication that our workforce size will stagnate soon.

With the number of children in India reducing and the 18-23 population hardly growing, soon India may have an ageing population supported by a shrinking workforce.

Today, however, we have an incredible advantage — we are the youngest of the large economies. Median age in India is 28 years, compared to 32 in Brazil, 37 in China, 38 in the US, 40 in the UK, and 47 in Japan.

Having such a large young population is an irreplaceable opportunity India must take advantage of before it is too late. Here are some suggestions:

1. Robust educational pipeline: Now that the first step of 100 per cent enrollment in primary schools is complete, the focus must shift to keeping our children in school and providing them quality education.

Emphasis is needed in districts with low scholastic achievement. Today’s school students are tomorrow’s workforce.

2. Staffing for schools: A substantial part of the union budget supports teacher training and staffing in schools.

With the number of children in decline, we must understand when it will taper and plan to staff accordingly. Care must be taken not to over-budget and build excess capacity here.

3. Improve higher education: India’s higher education base lags in both enrollment and quality. AISHE 2018-19 indicates there are 51,649 institutions in India.

For an eligible population of 14.2 crores, that amounts to roughly 2,750 students per institution.

So, we have the base infrastructure required; we may need 10,000 more institutions over time but the focus now should be on enhancing our current institutions, improving enrollment and imparting quality education.

A study by the Federation of Indian Chambers of Commerce and Industry (FICCI) suggests that GER can grow to 50 by 2030.

Overall quality-wise, India’s institutions aren’t keeping up with the US and Chinese institutions — this year, for the first time in seven years, no Indian institute featured in the Times Higher Education (THE) World University Rankings.

We lag in research and impact, international outlook, and industry outcomes.

4. Build expertise in specialized industries with high value-add: Dominating some industries with high value-add compounds returns over time.

The Indian IT industry has already demonstrated this — it employs over 4.5 million highly skilled people, clocked USD 137 billion in exports last year, and has a high value add of 70.6 per cent (per Ministry of Statistics and Program Implementation and Central Statistics Office (MOSPI CSO)).

There is an urgent need to identify industries with high value-add and build pipelines — right from colleges to research laboratories and deployment infrastructure.

Other examples are financial services, hardware and chip design, automobile and EV design, defense equipment, new manufacturing paradigms in product design and 3D printing, pharmaceuticals, biotechnology, and chemicals.

5. Improve labour force participation: Our previous article compared EPFO (Employees’ Provident Fund Organisation) employment data with the number of graduates in each state to demonstrate that most states have very low coverage ratios.

Only Maharashtra, Karnataka and Gujarat are producing more formal jobs than graduates. India’s coverage ratio is barely over 50 per cent. There is an urgent need to provide mass employment as well as opportunities for highly-skilled workers.

6. Ensure participation of women: With a forecast of a gradually shrinking workforce, India needs to ensure participation of women to reap the demographic dividend.

As discussed in our previous article, women enrollment in higher education is on the rise and may overtake men's enrollment soon. There is an urgent need to carry forward this advantage into the workforce.

7. Improve alternative labour force training modes like vocational and skills training: Higher education is not the only workforce training mode.

South Korea, Japan and Germany have built robust industries like electronics manufacturing and automobile design with a highly-skilled workforce trained through vocational programs. Meanwhile, China is a great case study in imparting skills to a large population and providing mass employment in labour-intensive industries.

India must study these paradigms and deploy the same to build a robust workforce that can be converted into a massive economic and export-trade advantage.

With such policies, our young population can be assimilated into a skilled, diverse and specialized workforce — on the backbone of which India can become one of the Top 3 economies in the next decade.

This is urgently required to meet PM Modi’s ambitious vision of USD 5 trillion by 2025.

The article was first printed in the Financial Express.