India must look outward to reap demographic dividend (Comment)

Recent reports indicate India may not meet its objective of a stable population base by 2045. Instead, this goal is likely to be met only by 2060 when the country’s population stabilizes at 1.65 billion — 200 million more than the original target. After 10 years of rigorous enforcement, the mark has moved forward 15 years!

The government is confident that an increasing use of contraceptives will enable India reach this target (a brilliant deduction, but one thought we had already missed the target!) and is beefing up the supply chain mechanism to reach the grassroots. But the government does not want to impose legislation to drive stricter compliance — possibly mindful of the reaction of the “aam aadmi” (votebank!) to such imposition in the mid-1970s.

While the government wakes up to this new reality, expert estimates have suggested for some time that India will not lose much of its enthusiasm for procreation in a hurry and its population will keep growing almost till the turn of the next century (something that the future health minister will possibly realize 10 years from now!).

For the past 60 years, India has instituted a pioneering family planning programme that has halved the country’s fertility rate to under three, but its population has still increased 3.5 times over this period, contributing, along with Africa, to half the world population growth in recent years.

As the “aam aadmi” grew in number post-independence, his affluence measured by per capita gross domestic product (GDP) inched up at a what economists and demographers refer to as the “Hindu rate” of 1.5 percent annually right up to 1980 — a legacy of the Soviet-style central economic planning that advocated public investments in heavy industry, license-driven private entrepreneurship and cottage industries at the grass roots. All this while, most of the country continued to till the land.

Since 1980, however, India has steadily upped its economic growth momentum and is now poised at the cusp of greatness. The key task is to harness the rapidly growing productive (15-64 years) population base. We can learn from China, now four times our size as an economy, that derived significant advantage from pushing its productive resources — man and machinery — to its cities. This propped up its growth rates to vertigo-inducing levels over the last three decades as rice farmers transformed into factory workers.

China has absorbed an additional 400 million in its cities since 1980 compared to India’s 200 million. Over the next three decades it is now India’s turn to gainfully employ 400 million people that will flock to its cities. But given the state of Indian cities, such pressure is likely to cause them to implode.

The situation is grim, is there a solution? Well, send the migrant from Jhumri Talaiya straight to Tokyo!

Japan’s population peaked at 128 million five years ago and has started declining. By 2050, Japan will have less than 100 million people and 50 million by the turn of the next century. The country’s fertility rate has remained under 2.1, the level needed to sustain a low mortality population group, and remains steadfast at around 1.5 despite the government’s best attempts to vitalize it.

As a result, the country will see growing labour shortages and decline in consumer demand, asset values and overall economic productivity. Meanwhile, it is estimated that Japan’s GDP will crawl up from $5 trillion at present to $6 trillion by 2050. Achieving this will require unprecedented increase in productivity of the average worker, backed by huge investment in technology, both of which are unlikely to happen in the prevailing recessionary conditions. So, the economy may instead be headed south over time.

Japan desperately needs people, rural India desperately needs employment. And the opportunity is not limited to Japan alone. Countries across Europe will see their populations shrink, requiring external infusion of human resources to maintain economic productivity.

Most of India’s states have a large and ever-growing base of people who have nowhere to go — the country’s farmlands cannot sustain more people, its cities have no space left in them and infrastructure investments that can potentially create more localized opportunities are not taking off as rapidly as they should be.

Now is the time for India to break free from its Nehruvian obsession with self- sufficiency and look outward. The key is to closely track global skill gap-based opportunities, prime up the currently unemployable rural mass and invade greener pastures globally — the grass on this side of the fence has all been eaten up!

(7.2.2011 — Shiv Muttoo is assistant vice president for investor relations with Hindustan Construction Company. The views expressed in the article are personal. He can be reached at shiv_muttoo@yahoo.com)