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Published: May 25, 2010
 / Summer 2010 / Issue 59

 
 

Preparing for a Demographic Dividend

At the World Economic Forum’s fall meeting in New Delhi, five experts discussed the challenges and opportunities India faces as its population becomes increasingly youthful.

Participants were Sudhakar Balakrishnan, Thomas Crampton, Shobana Kamineni, Naresh Malhan, and C.K. Prahalad; moderated by Thomas A. Stewart.

Demographics are destiny. Countries with a large and expanding workforce and relatively few people of dependent age (under 15 or over 64) can reap what Harvard School of Public Health demographer David Bloom has called a “demographic dividend.” Young, unencumbered workers spur entrepreneurship and innovation, enabling significant gains in productivity, savings, and capital inflows. As fresh ideas flourish, governments can focus on improving infrastructure and helping to fund such critical technologies as intelligent transportation systems, smart utility grids, and renewable energy. The World Health Organization (WHO) estimates that the demographic dividend can increase a country’s GDP growth by as much as a third.

No country is better poised to take advantage of the demographic dividend than India. (See “India’s Demographic Moment,” by Nandan Nilekani, s+b, Autumn 2009.) In 2020, the average age in India will be only 29 years, compared with 37 in China and the United States, 45 in western Europe, and 48 in Japan. Moreover, 70 percent of Indians will be of working age in 2025, up from 61 percent now. Also by 2025, the proportion of children younger than 15 will fall to 23 percent of India’s total population, from 34 percent today, while the share of people older than 65 will remain around just 5 percent. China’s demographics are not as rosy as India’s, because the government’s policies to limit population growth will have created an abnormally large cohort of people over age 60 by 2040. Other emerging nations, such as Pakistan, Indonesia, and certain countries in Latin America and Africa, will produce much larger workforces in the coming years. But their demographic dividends may be inhibited by political and social instability that impedes efforts to put this young population to productive use; a country with massive numbers of unemployed young people and no constructive economic outlet for their dynamism is headed for trouble.

Although India’s stars are more perfectly aligned, its success is anything but guaranteed. The value of India’s demographic dividend will depend in great measure on whether the public and private sector have the political will and foresight not only to create jobs but also to train the new workforce, encourage global trade, improve a failing education system, provide better housing, lure capital to support innovation, and implement policies that engender confidence in the economy. Given India’s relatively strong democracy, government institutions, and entrepreneurial sector, its attempts to grapple with these thorny issues would seem to offer learning opportunities for other countries that are still a step or two away from enjoying a demographic bounty. To explore India’s prospects — what the country must do and what it must avoid; its possible economic weaknesses and how it can make the best use of its people, businesses, government, and creativity — strategy+business teamed with the World Economic Forum to host a roundtable of experts on India. (A separate s+b/World Economic Forum roundtable addressed a very different subject: the challenges presented by aging workforces in some regions, including Europe and Japan. See “Facing Up to the Demographic Dilemma,” with Yoshito Hori, Jean-Pierre Lehmann, Timothy Ma Kam Wah, and Vanessa Wang, s+b, Spring 2010.) The discussion covered a wide range of issues, from developing human talent to the urban–rural divide, and from the effects of innovation on economies to the desperate need for new neighborhoods, schools, hospitals, roads, and drugstores in emerging nations.

 
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Resources

  1. David E. Bloom, David Canning, and Jaypee Sevilla, The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change (RAND Corporation, 2003): A review of the effects of demographic change on economic growth.
  2. Thierry Geiger and Sushant Palakurthi Rao, The India Competitiveness Review 2009 (PDF) (World Economic Forum, 2009): An in-depth analysis of India’s current and future ability to compete in the global commercial landscape.
  3. Yoshito Hori, Jean-Pierre Lehmann, Timothy Ma Kam Wah, and Vanessa Wang, “Facing Up to the Demographic Dilemma,” s+b, Spring 2010: At the World Economic Forum’s summer meeting in Dalian, China, four experts discussed the challenges and opportunities that aging populations present to business in emerging Asian countries.
  4. Nandan Nilekani, “India’s Demographic Moment,” s+b, Autumn 2009: The economic force of a burgeoning population.
  5. C.K. Prahalad, “The Innovation Sandbox,” s+b, Autumn 2006: Explores innovation in India’s health-care sector as a model for commercial creativity in all industries and all economies.
  6. World Bank Group’s End Poverty in South Asia blog: A blog devoted to exchanging ideas on ending poverty and dealing with demographic trends and issues in South Asia.
  7. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/organizations_and_people