Today’s India resembles a cricket team with a deep reserve bench, full of young talent but unable to bring enough players onto the field. The country has the largest working-age population in the world, a potential economic engine often described as the demographic dividend. Yet without adequate job creation, stronger human capital, and a more productive labour market, this advantage could turn into a liability. And unlike test cricket, economic opportunities do not offer a second innings.
A demographic dividend arises when the working-age population is significantly larger than the dependent population. This demographic shift can support faster growth because a bigger labour force can raise productivity and savings. India fits this profile today, with 68.4% of its population in the working-age bracket, according to the World Economic Forum. But this favourable composition will deliver results only if the workforce is skilled, healthy, and gainfully employed, conditions that remain uneven across states and sectors.
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India’s job market and skills mismatch
The latest Periodic Labour Force Survey (2023–24) reports youth unemployment at 10.2%, but the headline figure hides the scale of informal work, under-employment, and fragile job quality. Employers consider barely half of India’s graduates job-ready. The Economic Survey 2023–24 puts employability at 51.25%, and the World Bank–Wheebox Skills Report places it at just above 50%. Similar assessments by Morgan Stanley point to a deeper mismatch between what the education system produces and what the labour market demands. Without stronger foundations, the aspiration of a Viksit Bharat by 2047 will remain distant.
Even beyond the mismatch between skills and jobs, the quality of work itself remains India’s weakest link. Most employment continues to be low-wage and low-productivity. The International Labour Organisation estimates that 92% of the workforce remains informal, with limited social protection and volatile incomes. Gig work has expanded rapidly, adding flexibility but little security, as most workers lack benefits, insurance, or predictable wages. Real earnings have barely risen in many categories for a decade. A demographic dividend cannot materialise if millions are absorbed into subsistence-level work that adds little to national productivity. India needs more productive employment, not just employment.
Health, education, and demographic dividend
India’s health indicators reveal another constraint that rarely enters mainstream economic debate. NFHS-5 shows that 57% of women are anaemic and 35% of children are stunted. These numbers reflect long-term losses in cognitive development and physical capacity. Poor urban sanitation, recurring disease burdens, and limited access to primary healthcare further weaken human capital. A demographic dividend assumes a workforce that is healthy enough to learn faster, work efficiently, and contribute productively. India cannot meet that requirement without stronger public health systems and better nutrition outcomes.
Education quality represents the third critical link in the demographic chain. While debates focus on graduate employability, the deeper problem lies in weak foundational learning. ASER surveys repeatedly show that many Class 5 students cannot read basic texts or perform simple arithmetic. These early learning deficits follow students throughout their lives and weaken the effectiveness of vocational training and higher education. India produces millions of degree-holders, but many lack essential cognitive and analytical skills. A demographic dividend begins in the primary classroom; without stronger school systems, skilling programmes will continue to underperform.
India’s readiness for an ageing future
India must also plan for the demographic transition already under way. Pension coverage remains limited, savings are weakening, and insurance penetration remains inadequate. Countries such as Brazil and Thailand, which aged before achieving high incomes, now face rising fiscal pressures and shrinking labour forces. India faces a similar risk if its social security architecture remains loose and fragmented. Without deeper reforms in pensions, long-term savings, and elderly care, today’s demographic opportunity could turn into tomorrow’s demographic bill. Planning for ageing is no longer a distant concern; it is a necessary part of managing the demographic transition underway.
China’s experience shows what can be achieved when demographics align with policy choices. When China began its reforms in 1982, 62% of its population was of working age, a profile similar to India’s today. China invested heavily in education, vocational training, manufacturing, infrastructure, and export-led industries. This strategy absorbed millions into productive work and, according to the World Bank, lifted 800 million people out of poverty. India’s labour market, with its services-heavy structure and weaker manufacturing base, lacks comparable absorption capacity.
Japan and the costs of missing the window
Japan offers the opposite lesson. It enjoyed a strong demographic dividend in the post-war decades, but once fertility fell and the population aged, growth stagnated. Today, Japan has the world’s highest median age at 49.5 years, with nearly 30% of its people above 65. Its fertility rate of 1.2 makes demographic renewal difficult. India is not yet in this position, but the trend is unmistakable. The country’s Total Fertility Rate has already fallen to 1.9, below replacement level, and the median age of 29 will rise steadily over the next decade.
India has perhaps a decade to convert its demographic advantage into sustained growth. The essential policy directions are clear: skills must align more closely with industry needs; job creation must expand in productive sectors through stronger MSMEs, easier credit, and simpler compliance; public health and education systems require significant strengthening; pension coverage and long-term savings must expand; and new growth engines must emerge in clean energy, healthcare, advanced manufacturing, and AI-enabled services. India is moving in these directions, but not fast enough to match the demographic clock.
Demographic dividends are temporary. They create opportunities but do not guarantee outcomes. India stands at the midpoint of a narrow window that will close as fertility declines and the workforce ages. If the country does not act decisively now, it risks slower growth, deeper inequality, and a heavier social burden later in the century. The choice is clear: India must use the dividend, or it will lose it.
Akash Nigam is an MSc Economics and Analytics student and Dr Salineeta Chaudhuri Associate Professor, Economics at Christ University, Delhi-NCR.