Implications of India’s Demographic Dividend

Reference

According to experts, India’s demographic dividend could turn into a demographic disaster if ‘employment generation and skill development’ do not keep pace with the growing workforce.

India’s Demographic Dividend

• India’s ‘demographic dividend’ has long been considered a key driver of the country’s future growth.
• The country boasts of one of the youngest populations in the world with over 80 crore people under the age of 35.
• India’s average age is 28.4 years (2024) with over 65% of the population in the working age group (15-64 years).
• Without structural reforms, this dividend could lead to social unrest, inequality and economic slowdown.
• This ‘demographic asset’ is in danger of becoming a ‘demographic liability’ with the growing gap between education and real-world skills, degrees and employability. If this gap is not addressed, India’s demographic dividend could turn into a demographic paradox.

Challenges to the demographic dividend

• Rising unemployment among educated youth: While India produces millions of graduates every year, many of these graduates are still underemployed and rapidly becoming unemployed.
  • This is not just a problem faced by social science or non-STEM (science, technology, engineering and mathematics) students.
  • Data from the last decade shows that 40%-50% of engineering graduates from Indian universities have not found jobs, highlighting the alarming gap between academic education and industry needs.
• Gap between education and industry demand: Stakeholders in the higher education sector agree that courses are not in sync with the needs of a rapidly changing job market.
  • According to the India Skills Report, 2024, more than 65% of high school graduates earn degrees that do not align with their interests or abilities.
  • Students emerge from their degrees unprepared for a rapidly changing job market.
  • The Graduate Skills Index, 2025 by Mercer-Metall found that only 43% of Indian graduates are considered job ready.
• Female labour force participation is low (~24%). There is also pressure on urban infrastructure, healthcare and education.

Government efforts

• The Indian government has launched several initiatives aimed at addressing the skills gap. A major Skill India Mission aimed to train over 40 crore people by 2022.
• However, despite massive funding, the mission fell far short of this target.
• Apart from the Skill India Mission, several other policies have been launched, including:
  • Pradhan Mantri Kaushal Vikas Yojana (PMKVY)
  • Pradhan Mantri Kaushal Kendra (PMKK)
  • Jan Shikshan Sansthan (JSS)
  • Pradhan Mantri Yuva Yojana (PMYY)
  • Skill Acquisition and Knowledge Awareness for Livelihood Promotion (Sankalp)
  • Pradhan Mantri Internship Yojana

Way Forward

• India needs an integrated strategy that aligns education and skill development with industry demands. To make this happen, coordination with NITI Aayog, Association of Indian Universities and the Ministry of Skill Development is essential.
• Collaboration between the government, private sector and academic institutions will be essential to create a strong ecosystem for skill development. 
• Job creation is needed in manufacturing, green economy and services. Vocational training and skills programmes and gender-inclusive workforce policies are also vital.
• Creating opportunities and infrastructure to tap opportunities in AI, digital economy and global supply chains is a common demand.