Demographic dividend cannot guarantee India’s rise

By Lin Minwang Source:Global Times Published: 2018/11/14 22:55:48

Illustration: Luo Xuan/GT

Without enough jobs, India's current demographic dividend may instead turn into a burden. People have been talking about India's rise since the end of the Cold War, and the country's economy has indeed grown quickly. India's GDP was $274 billion at the time of the 1991 economic reforms. By the end of 2017, the figure had grown to $2.59 trillion, making India's economy the world's sixth-largest, according to the latest figures from the World Bank. Many people are convinced that India will create a new human development miracle, specifically because India has a young population and a demographic advantage that will continue for more than a decade.

There is no doubt about the advantageous age structure of India's population, but a dialectical approach to this is necessary.

India's demographic advantage can only be brought into full play if it is combined with economic development. This is why Prime Minister Narendra Modi has been trying to push forward the "Make in India" initiative, which is aimed at developing labor-intensive industries in order to address the problem of inadequate employment.

However, the campaign hasn't made that much progress, even after several years of efforts. Two factors are worth noting. First, India has missed the best time for embracing globalization.

In the 1980s, China carried out its reform and opening-up to develop its labor-intensive manufacturing sector, giving full play to the comparative advantages of its labor force. At that time, the government of former prime minister Rajiv Gandhi guided the Indian economy toward the services sector, and the country became known as the "world's office." The difference between the original paths of economic development led to the different approaches to subsequent development. It is no easy task for the Modi government to make a readjustment now.

Second, India still needs to make great efforts in improving its business environment in order to carry forward the "Make in India" initiative. The country ranked 100th in the World Bank's Ease of Doing Business global rankings for 2018, up from 130th in 2017. However, compared with China's ranking of 78th, India still has a long way to go.

The Japanese government has been trying to transfer some industries to India, but the Japanese business community has been less enthusiastic. The construction of the high-speed railway line fashioned after Japan's shinkansen system offers another example of the difficulty of doing business in India. A grand groundbreaking ceremony was held for the project in Ahmedabad last year, but the progress of land acquisition for it has been very slow.

Also, the demographic advantage may be greater in terms of quantity than quality. The 2018 Human Development Report published by the UN Development Program ranked India at 130th. The ranking underlines India's serious inadequacies in its basic education and medical systems. Without good education and training, it will be hard to improve the country's employment situation. The country needs to launch more vocational skills training for the sake of the "Make in India" initiative.

Another challenge facing the country is the development of artificial intelligence (AI), which may actually offset India's demographic advantage. To a certain extent, the rise of AI is partly to do with the "low fertility trap" in some developed economies. Countries with aging populations have also come up with their own strategies for AI. India is trying to keep up with the AI development tide, but the question is: With the development of AI and automated manufacturing, how will India provide jobs and social security to its large population?

In short, it seems inappropriate to simply take it for granted that the demographic dividend will lead to India's rise.

To really make good use of this advantage, timing and greater efforts are both important.

The author is a research fellow with the Institute of International Studies at Fudan University.


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