Sunday, 5 May 2013

                                                      POPULATION VS ECONOMY

The debate of population and economy dates back to Malthus. According to Malthus with increasing economic growth population increases with higher fertility and lower mortality. On the other hand increasing population under constant input such as land translates into lower marginal productivities and thereby reducing economic growth. This theory created quite a stir in England in the 19th century but the population and the economy continued to increase proving the Malthus theory to be wrong.

As we have seen that the various results of the demographic transition models pertaining to mortality and birth rate are directly linked to per capita income of a nation rather than aggregate output. Here when addressing, the often asked question is the suffiency of the food grains for the population. This as the economists observe is a question of whether the people can buy rather than the whether adequate presence of food grains. When people earn money they could import food grains from various developing countries selling them.

Another question of how population increase would pressurise institutions like education and intensify the foreign exchange constraints by placing more pressure on balance of payment. Here the concerns are about how the pressure would result in the fall in standards of education which would end in fewer enrolments and drop outs are very true in a developing country like India.

But what higher working population would result is a very large labour force with less minimum wage and thus encouraging labour based industries.This larger labour force would result in economic development of country and also reduces the problem of unemployement.According to demographic transition model every country has this window of opportunity called demographic dividend.

The demographic dividend is a window of opportunity in the development of a society or nation that opens up as fertility rates decline when faster rates of economic growth and human development are possible when combined with effective policies and markets. The drop in fertility rates often follows significant reductions in child and infant mortality rates, as well as an increase in average life expectancy. As women and families realize that fewer children will die during infancy or childhood they will begin to have fewer children to reach their desired number of offspring. However, this drop in fertility rates is not immediate. The lag between produces a generational population bulge that surges through society. For a period of time this “bulge” is a burden on society and increases the dependency ratio. Eventually this group begins to enter the productive labor force. With fertility rates continuing to fall and older generations having shorter life expectancies, the dependency ratio declines dramatically. This demographic shift initiates the demographic dividend.”

India’s population is expected to cross China’s population in 2025.Most of this population is going to be in working age group resulting in the demographic dividend for India. Though this provides a window of opportunity of development,It also challenges us of how India will be able to provide basic food and water to all it’s population.

There are four stages of development in demographic dividend. First the increased labour supply. Though this is dependent on how government will be able to grasp available work force. Next the increase in savngs.As the number of dependents decrease there will be an increase in saving resulting in the economic boost. Next is the increase in the human capital. As there are less children parents invest more on each resulting in better education and health outcomes. And finally is the growth in domestic demand due to increased per capita income and less dependency ratio.

As we can see that the first mechanism is a root for a countries development during demographic divedend.So government has to come up with policies that would increase the opportunity of employment with which there could be a social chaos. The Right To Education Act is definitely one policies towards the right direction if implemented properly.

Indian Case:

he International Labour Organisation has predicted that by 2020, India will have 116 million workers in the age bracket of 20 to 24 years, as compared to China’s 94 million. This demographic fact has the potential to be the biggest competitive advantage of India in the years to come.

As we know that education is of utmost importance and since adapting adopting RTE, we have achieved a gross enrolment ratio (GER) in primary education of 104 per cent. The challenge, however, is sustaining these rates of enrolment into higher education. In that arena, we stand nowhere near the global GER of 29 per cent, with a historically low GER, currently at 18 per cent.

And so to tackle the question of employement, Government of India has proposed to create 100 million jobs by 2022 in its 12th five year plan.

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