Demographic Dividend

Demographic dividend means the economic growth potential that arises when a country has a relatively large share of people in the working-age group compared with dependants. In precise terms, it is the gain from a favourable age structure during demographic transition, when falling fertility reduces the dependency ratio and can raise output, savings and investment. It is only a potential advantage; it becomes real growth only if the working-age population is healthy, educated, skilled and productively employed.

Key points

• The demographic dividend usually appears during demographic transition, after mortality and fertility decline and before population ageing raises the old-age dependency burden.
• A lower dependency ratio can increase household savings and allow greater public and private investment in education, health, infrastructure and productive capacity.
• Human capital is the central condition: adequate nutrition, healthcare, school education, higher education and vocational skills are needed to make a young population employable.
• Job creation is essential because a large labour force without sufficient productive employment can turn the dividend into unemployment, underemployment or social stress.
• Female labour force participation, gender equality in education and safe working conditions expand the effective workforce and improve household and national productivity.
• Labour-intensive manufacturing, modern services, entrepreneurship, infrastructure and a predictable business environment help absorb young workers into higher-productivity activities.
• For India-Japan linkage, India’s relatively young labour force and Japan’s ageing society, technology and capital make skills, investment, manufacturing and human-resource cooperation a natural area of partnership.

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