The utopian myth of India?s double dividend

Friday, December 7, 2007

Sheila Dikshit, chief minister of the Indian capital territory of Delhi, looks neither fat nor nervous, but she was disarmingly frank this week about the difficulties of coping with an annual influx of half a million migrants into her metropolis of 16m.

?I?ve put on some weight merely because I want to drown my anxiety by eating,? she told a conference of the World Economic Forum and the Confederation of Indian Industry. If her administration did not meet the needs of Delhi?s inhabitants, she warned, one of the world?s largest cities would slide downhill. ?Each one of them when they live in Delhi, they want more water, more power, they want more wages, more oil.?Her honesty was refreshing. It is slowly dawning on Indian policymakers that the country?s much-trumpeted ?demographic dividend? ? the population surge that will increase the workforce to 800m by 2016 and make India the world?s most populous nation ? may turn out to be more of a threat than an opportunity.Who will create the jobs to absorb the net increase of 71m young people of working age over the next five years? Most are poorly educated and only a fraction will find regular work.

Who will feed them and supply them with water and fuel? India has 18 per cent of the world?s population but only 4 per cent of its fresh water and just over 2 per cent of its land area. Many of the country?s groundwater aquifers are already in critical condition. Available per capita water supply has declined since 1975 and water demand is set to exceed all usable sources of supply by 2050.

The bulge of young people today, furthermore, will in time become a bulge of pensioners in a country where only 11 per cent of the working-age population have formal pension arrangements. India will thus face the same problems of ageing and high dependency ratios as Japan and Europe today, only on a larger scale.

All six risks facing India identified by the WEF and the CII ? inequality within a rising population, water shortages, high oil prices, global protectionism, climate change and infectious diseases ? originate, at least in part, in the alarming growth of the Indian population.

Not to worry, say the optimists, for India enjoys a second dividend as important as the first: democracy. India, according to Kamal Nath, the ebullient minister of commerce and industry, is an ?island of stability? in a region of turbulence and authoritarianism, ?a large country with a large population functioning as a democracy, a country with a young workforce that is raring to go?.

This is utopianism. While the national population explosion places nearly intolerable strains on India?s physical and social infrastructure, the country?s democracy is so dysfunctional that it is reasonable to ask whether it can rise to the looming economic and demographic challenges.

Source: Financial Times (link opens in a new window)