Model Question and Answers for APSC | What is meant by Demographic dividend? Suggest measures through which Indians can realise Demographic dividend. (APSC 2011)
Ans : Demographic dividends are occurrences in a country that enjoys accelerated economic growth that stems from the decline in fertility and mortality rates. A country that experiences low birth rates in conjunction with low death rates receives an economic dividend or benefit from the increase in productivity of the working population that ensues. As fewer births are registered, the number of young dependents grows smaller relative to the working population. With fewer people to support and more people in the labour force, an economy’s resources are freed up and invested in other areas to accelerate a country's economic development and the future prosperity of its populace.
There are four main areas where a country can find demographic dividends:
1. Savings—During the demographic period, personal savings grow and can be used to stimulate the economy.
2. Labour supply—More workers are added to the labour force, including more women.
3. Human capital—With fewer births, parents are able to allocate more resources per child, leading to better educational and health outcomes.
4. Economic growth—GDP per capita is increased due to a decrease in the dependency ratio
Measures through which Indians can realise Demographic dividend
The benefits gotten from a demographic transition is neither automatic nor guaranteed.
1. Any demographic dividend depends on whether the government implements the right policies in areas such as education, health, governance, and the economy.
2. In addition, the amount of demographic dividend that a country receives depends on the level of productivity of young adults which, in turn, depends on the level of schooling, employment practises in a country, timing, and frequency of childbearing, as well as economic policies that make it easier for young parents to work.
3. The dividend amount is also tied to the productivity of older adults which depends on tax incentives, health programs, and pension and retirement policies.
4. To receive a demographic dividend, a country must go through a demographic transition where it switches from a largely rural agrarian economy with high fertility and mortality rates to an urban industrial society characterised by low fertility and mortality rates.
5. In the initial stages of this transition, fertility rates fall, leading to a labour force that is temporarily growing faster than the population dependent on it.
6. All else being equal, per capita income grows more rapidly during this time too. This economic benefit is the first dividend received by a country that has gone through the demographic transition.