Demographic dividend or curse?

India is facing a huge demographic advantage, which is likely to continue for another 10-15 years.

Demographic advantage means that percentage of working/workable hands is highest in the world. China too enjoyed this and utilised to grow in double digits for more than a decade making itself a big economic powerhouse. India can repeat the same, but we are happy to have a growth well below double digits.

Apart from this, our vast percentage of children is uneducated or undereducated. Even a large number of youths are unemployable. If we have large youth population remaining unproductive and unemployed, this will put immense pressure on existing resources, leading to chaos and deterioration in law and order.

Despite this, we have one of lowest per-capita expenditure on education in the world. Higher education is being increasingly left in private hands and slowly moving out of reach for major part of the population. Higher education is important to produce Doctors, Engineers, Scientists and even Teachers. Besides this, it improves the earning capability of individuals. Increased incomes help in increased spending, increased demand and further increased jobs. Doctors, Engineers, Scientists, Researchers and Teachers have capacity to earn foreign exchange. This fact is corroborated by the large foreign exchange contribution by repatriates and software exports. It can be easily examined by the Forex inflows and outflows every year. Most of our trade deficit is being met by surplus in services. This is the case, when we have low percentage of population qualifying as Doctors and Engineers. If the base is increased, we will see further increase in this surplus from services, which is likely to meet entire deficit and may even lead us to current account surplus.

As most of the engineers produced are absorbed by the outsourcing industry, we are not getting good number of researchers leading to large amount spent on technology imports, which also lead to economic disadvantage for local industry, who are unable to compete worldwide. Technology imports, mostly done by the Indian industrialists, who are mainly financiers than actual entrepreneurs have disadvantages. They come at a cost raising the project cost and procuring second-rate technology, as no commercial enterprise will provide technology to create its competitor. Despite huge income tax break on R&D (this should again be linked with Intellectual property rights to avoid misuse), there is very small expenditure on it by Indian Corporates. If IP Assets are taken into account, our big corporates including Reliance and Tata will fall apart. This is the reason for huge trade deficit faced by the country.

Continued……..