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The Demographic Structure of the Indian Society The bias towards younger age groups in the age structure is believed to be an advantage for India. Like the East Asian economies in the past decade and like Ireland today, India is supposed to be beneﬁtting from a ‘demographic dividend’. This dividend arises from the fact that the current generation of working-age people is a relatively large one, and it has only a relatively small preceding generation of old people to support. But there is nothing automatic about this advantage – it needs to be consciously exploited through appropriate policies as is explained in Box 2.3 below. Does the changing age structure offer a ‘demographic BOX 2.3 dividend’ for India? The demographic advantage or ‘dividend’ to be derived from the age structure of the population is due to the fact that India is (and will remain for some time) one of the youngest countries in the world. A third of India’s population was below 15 years of age in 2011. In 2020, the average Indian was only 29 years old, compared with an average age of 37 in China and the United States, 45 in Western Europe, and 48 in Japan. This implies a large and growing labour force, which can deliver unexpected beneﬁts in terms of growth and prosperity. The ‘demographic dividend’ results from an increase in the proportion of workers relative to non-workers in the population. In terms of age, the working population is roughly that between 15 to 64 years of age. This working age group must support itself as well as those outside this age group (i.e., children and elderly people) who are unable to work and are therefore dependents. Changes in the age structure due to the demographic transition lower the ‘dependencyratio’,ortheratioofnon-workingagetoworking-agepopulation, thus creating the potential for generating growth. But this potential can be converted into actual growth only if the rise in the working age group is accompanied by increasing levels of education and employment. If the new entrants to the labour force are not educated then theirproductivityremainslow. Iftheyremainunemployed,thentheyareunable to earn at all and become dependents rather than earners. Thus, changing agestructurebyitselfcannotguaranteeanybeneﬁtsunlessitisproperlyutilised throughplanneddevelopment. Therealproblemisindeﬁningthedependency ratio as the ratio of the non-working age to working-age population, rather than the ratio of non-workers to workers. The difference between the two is determined by the extent of unemployment and underemployment, which keep a part of the labour force out of productive work. This difference explains why some countries are able to exploit the demographic advantage while others are not. India is indeed facing a window of opportunity created by the demographic dividend. The effect of demographic trends on the dependency ratio deﬁned in terms of age groups is quite visible. The total dependency ratio fell from 79 in 1970 to 64 in 2005. But the process is likely to extend well into this century with 23 the age-based dependency ratio projected to fall to 48 in 2025 because of continued fall in the proportion of children and then rise to 50 by 2050 because of an increase in the proportion of the aged. Reprint 2026-27