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Need urgent action to reap demographic dividend

TV Mohandas Pai
demographic dividend, India, CAGR, liquidity crisis, MHRD data, Gross Enrollment Ratios in primary school, AISHE data

By TV Mohandas Pai & Nisha holla

India is on a formidable growth trajectory since liberalisation in 1991. In nominal terms, the economy has grown from $275 billion in 1991 to $2.7 trillion in 2019, at a CAGR of 8.5%. 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 nation-building mode. Understanding how our demographics are changing is more important than ever to plan this.

Over the last twenty years, India has achieved ~100% enrollment in primary school. The accompanying graphic shows the number of children enrolled, and Gross Enrollment Ratios (GER) in primary school. GER is the ratio of children enrolled in a particular class to the eligible population in the age group for that class (ages 6-10, for primary school). The prominent rise of mid-day meal schemes since 2000 has contributed towards higher enrollment. GER can go over 100, as it has most years since 2001, when children outside ages 6-10 enroll in primary school. 100+ GERs indicate that many older students, who probably missed out on the opportunity to study at that age, are joining school to get an education now. 100+ GERs could also indicate some students are failing to move into secondary school, and are being held back. GER rose up to 115.5 at peak in 2010-11, indicating 15.5% more children enrolled apart from those in the age bracket of 6-10 across India. It has since reduced to ~100.

With ~100% 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% in 1991 to 13% in 2011, and may decline to 11% in 2021, as analysed in our previous article (bit.ly/2krwGa2).

MHRD data indicates that of the 100 children entering Class 1, ~80 move onto Class 10, where ~79% pass, and 56 enter Class 12, where ~78% pass the state and central boards. 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% of children in Class 8 can read Class 2-appropriate texts. Policymakers must use MHRD's massive database that has comprehensive examination performance data to understand quality of students-both urban and rural.

After Class 12, the number of youngsters entering higher education drops further-AISHE data indicates GER in 2018-19 was 26.3 across India. AISHE also uses the information from its surveys to estimate the population in the ages of 18-23, the eligible ages for higher education. The accompanying graphic indicates this number has hardly grown from 14.03 crore in 2011 to 14.2 crore in 2018, translating to a CAGR of only 0.18%. 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 here 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.

Robust educational pipeline: Now that the first step of 100% enrollment in primary school is complete, focus must shift to keeping our children in school, and providing a quality education. Emphasis is needed in districts with low scholastic achievement. Today's school students are tomorrow's workforce.

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 staffing accordingly. Care must be taken not to over-budget and build excess capacity here.

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 crore, that amounts to ~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 FICCI suggests GER can grow to 50 by 2030. Overall quality-wise, India's institutions aren't keeping up with US and Chinese institutions-this year, for the first time in seven years, no Indian institute featured in the Times Higher Education World University Rankings. We lag in research and impact, international outlook, and industry outcomes.

Build expertise in specialised 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 $137 billion in exports last year, and has a high value-add of 70.6% (per 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, defence equipment, new manufacturing paradigms in product design and 3D printing, pharmaceuticals, biotechnology, and chemicals.
Improve labour force participation: Our previous article (bit.ly/2GAaSk6) compared EPFO employment data with 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%. There is urgent need to provide mass employment as well as opportunities for highly skilled workers.
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 (bit.ly/2WSFKWq), women's enrollment in higher education is on the rise, and may overtake men's enrollment soon. There is urgent need to carry forward this advantage into the workforce.

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 these policies, our young population can be assimilated into a skilled, diverse and specialised workforce, on the backbone of which, India can become a top-three economy next decade. This is required urgently to meet PM Modi's ambitious vision of $5 trillion by 2025.

Pai is Chairman, Aarin Capital Partners & Holla is Technology fellow, C-CAMP. Views are personal