Data released by the United Nations earlier in April shows that India is poised to overtake China as the world's most populous country. The Quint spoke to Santosh Mehrotra, a developmental economist, to understand whether or not we should be worried about this new record.
Q: Broadly speaking, is this good news or bad news for the country?
Definitely bad news.
Q: And that is because …?
Let's begin with the history of population change, China versus India. When we both became independent in the late 1940s, China's population was 550 million. After the partition, India’s population was 330 million. The Chinese were 220 million people ahead of us. Now, while their population has grown like ours, we are still going to exceed them. So, we must have done something wrong and they must have done something right.
There are three things that the Chinese did right in the first 30 years after their independence, that we did not.
Firstly, they invested in the health of their population, right down to the lowest level
Secondly, they invested in primary school education for all the children across the country, which we did not. We became serious about health and education after the 1991 economic reforms began
And thirdly, they ensured asset equality in a way that we did not. Let me explain this in more detail
They carried out massive land reform, including collectivization, which ensured that a poor country, when starting out on its journey of development, had relatively equal asset distribution. In our country, we had already inherited an extremely unequal distribution. This did not improve despite the abolition of the Zamindari system.
And on top of that, unlike China, we were an extremely unequal society, and socially stratified on the lines of caste, a phenomenon that does not exist in most other parts of the world. That has had implications for our human development and of course, our politics. Its result was an education system whose outcomes we are seeing to date. We did not believe that in a socially stratified society, many of the poorest people, who are also Dalits, Adivasis, or Muslims need to be educated.
Q: Is the optimism around India’s demographic dividend a bit misplaced? About ‘15-64’?
There is a potential for optimism. But the reality is pointing in the direction of pessimism. Let me give you reasons to be optimistic.
No one is denying that we still have a relatively young population. But the point is that we are a young population that is aging fast, and I don't think that this fact is recognized sufficiently by the general intelligentsia, including journalists, policymakers, and academics. Only demographers have understood this. Let me explain.
Every nation goes through a demographic dividend. We are also going through it. China's dividend is over. And the reason why there is some optimism in India, which I don't think is the case for the rest of the world, is that we still have about 15 to 17 years left in our demographic dividend to run out before we also become an ageing society. Our dividend began in the early 1980s. Then, the share of the working-age population began to rise and the share of our dependent population, which had been rising until then (from 1950-1980), began to fall. So, as the working-age population rises and the dependent population falls, that is called the demographic dividend.
Q: But why is it called a dividend?
The expectation is that in the early stages of development, the majority of the population is working in agriculture, as it was in China and in India. However, as the economy grows, and industry and services grow, people move out of agriculture into these sectors. Why is that a good thing? Why is it called a dividend? Because the productivity levels in industry and services are higher than in agriculture, leading to higher incomes.
Hence, those in agriculture want to move into industry and services-based jobs in cities. As people get jobs with higher productivity (hence higher incomes), their incomes increase, and their savings increase. The savings to GDP ratio as a result of any dividend tends to rise in the whole economy.
There is evidence in our own data, you could have a look at my book called “Realising the Demographic Dividend: Policies to Achieve Inclusive Growth in India,” where in chapter one, I explain this process.
As savings increase, the investable resources increase, therefore the investment rate increases and the investment to GDP rate rises. As the investment rate rises, the growth rate of the economy rises, which is exactly what happened in both India and China except that they did it much better and much faster than we did.
There is no question that our growth rate improved to 5.5 percent in the first decade of the dividend in the 1980s, compared to the 3.5 percent per annum that we had experienced in the first three decades after independence. And in the 1990s, it increased by an additional percentage point of about 6.4 percent per annum. In this century, it has increased even further, with the highest rate being achieved between 2003-2004 and 2014-2015 of 8 percent per annum. As a result of this, non-farming jobs were growing rapidly. People began to be pulled out of agriculture. In fact, for the first time in India's post-independence history, the absolute number of workers in agriculture fell after 2004-05. And that continued all the way to 2019.
Q: But now that trend has changed?
Yes, the catastrophic economic policy of this government prior to and during COVID has actually reversed the share of agriculture in total employment, which had been consistently falling from about 60 percent in the year 2000 to 42 percent in 2017-2018, which suddenly shot up in 2020 to 46.5 percent. The absolute number of workers in agriculture rose by 45 million in that year alone, thanks to the reverse migration and the collapse of jobs.
When our economy contracted by 6.6 percent in the following year, we added another 7 to 8 million to agriculture. At the same time, the number of workers and the contribution of manufacturing fell in India, the exact opposite of what happened in China.
Today, in China, the maximum number of people working in agriculture as a part of the total workforce is 30 percent. In India, it’s over 45 percent in 2022.
Q: So, all of this can be linked to the jobs crisis?
Yes, when I say we are doing everything possible to undermine our demographic dividend, one thing that we are managing to do is to not create non-agricultural jobs, the exact opposite of what China did. Secondly, while we inherited a literacy rate of 51 percent in 1991 when India's economic reforms began, China's literacy rate in 1979 when their economic reforms began, was about 75 percent. They managed to universalize and ensure 100 percent literacy within the next 10-15 years. We are still nowhere close to that. I'm talking about China being 20 to 25 years ahead of us in educational levels.
However, our educational investments increased immediately after 1991 with the Sarva Shiksha Abhiyan, the Right to Education. As a result of all that, we managed to universalize. We also managed to universalise the mid-day meal scheme for all our children which brought our children to school. But does that mean our children are learning? If our children are just attending school and not learning, then why should we expect them to be employable?
So, on the one hand, the economy is not generating jobs because of bad economic policies. Take demonetisation, an unplanned and badly implemented GST, or the worst and the most strict lockdown in the world. And we are not investing in health and education.
Q: Can you provide some numbers on these investments?
Did you know that in the last three years of this government, the central government's allocation to the health budget has not increased? Despite COVID? We were promised in 2017 that in the National Health Policy, expenditure on education will be increased from 1 percent to 2.5 percent of the GDP. But we are only at 1.3 percent of GDP in Finacial Year 2023. We are very far from achieving the 2.5 percent, despite a global pandemic intervening.
During the UPA years, we used to allocate 4 percent of the GDP to education, taking the state governments and the central government together. This government has come out with a new education policy which commits to 6 percent of GDP allocation. Do you know that the allocation of this government on education is 2.9 percent of GDP, states and central government combined? In other words, if we are not spending on education or on skill development, then how do we expect our youth, who are also poor and at low levels of learning, to become employable and find jobs? Economic policy failures are not generating jobs either.
Q: So we’re not prepared? What could we do to prepare?
Every year gone is a year lost before the disaster, that is, before the demographic dividend end, and before becoming an aging society, proclaiming to the world that two-thirds of our population is below 35. In 20 years when the dividend ends, how old do you think they will be? The same people will be close to 45, near retirement age. We are not preparing for a disaster.
Invest in health. Invest in education. Focus less on a 5 trillion dollar economy and more on creating jobs. You will get a big economy if you create jobs.
Why? Because you will then generate aggregate demand. And then, people will spend more on the products of industry and services. People will spend less of their total money on food. Today, people are surviving by spending their money on food and not having enough money to buy, say scooters. They are not going out to eat or to travel. You want the demand for services to improve, right? But you are increasing all the conditions for increasing income inequality by not reducing poverty. In the most recent economic recovery period, the demand for SUVs has increased, but the demand for entry-level cars and scooters has declined. Why? Think about it.
(This was first published on 25 April 2023. It has been republished from The Quint's archives to mark World Population Day.)
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