For all of India’s achievements in the past half century in building democratic institutions amidst poverty and widespread illiteracy, the “Argumentative Indian,” as economist and Nobel laureate Amartya Sen described his compatriots in the title of his 2005 book, is running out of debating time.
The next 20 years are crucial. India can choose to act now and get rich, or its people can continue to argue, stay poor — and become old. Indian policy makers can’t continue to chew cud on state-asset sales, urban renewal, capital account convertibility and labor-market flexibility.
Wolfgang Lutz, who runs the population research program at the Laxenburg, Austria-based International Institute for Applied Systems Analysis, set out India’s demographic challenge in the autumn 2005 edition of the research organization’s journal, “Options.”
Over the next two decades, the proportion of children younger than 15 will fall to 23 percent of India’s total population from today’s 34 percent, and the share of people older than 65, will increase to 7 percent from 5 percent, Lutz and co- researcher Sergei Scherbov say in their paper titled “India’s Window of Opportunity.”
Seventy percent of Indians will be of working age in 2025, up from 61 percent now. That means a typical Indian family will earn and save more, provided there are enough jobs going around. An average household will also have fewer dependents to provide for. The government will get more tax revenue, which it can invest in new roads and power stations.
“This temporary decline in the total dependency ratio, which presents a great opportunity for economic growth, has been labeled the `demographic bonus,’ which all countries undergoing modernization experience for a limited number of years,” Lutz and Scherbov say.
From a policy standpoint, the operative phrase here is, “limited number of years.” By 2025, India’s window of opportunity will close. Then a reversal will begin. Rising life expectancy and declining fertility will cause an almost threefold increase in the proportion of elderly by 2050, the researchers conclude.
India must harness its youth bulge with bold economic policies that support rapid urbanization and job growth.
For my part, no comment, as you already know what I think on this topic.