Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Economy: The demographic angle... - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Feb 20, 2007

    Economy: The demographic angle...

    While the Indian economy continues to display robust health as can be evinced from the strong GDP numbers, the changing demographics of India are also expected to contribute in its favour going forward. This is more so, given the fact that most of the developed nations are saddled with the increased burden of an ageing population. In this article, we shall highlight the positives of India's population and the challenges that it faces going forward.

    India's population: The positives...

    Getting younger: While India is slated to become the most populous country in the world, tipping China, what is important to note is that the population of India will also be relatively much younger. In fact in the Pharma Summit 2006, Brian Tempest (Chief Mentor of Ranbaxy) had stated that in India, while 50% of the population is below 25 years, around 65% is below 35 years of age. This implies that in the long-term, a big portion of the population will be within the working-age group, which will contribute to the economic growth and act as a source of the extra needed global workforce.

    Cheap and skilled labour: One of the reasons why 'outsourcing' is gaining momentum in the country is the availability of labour that has English speaking fluency and skilled expertise in certain domains. The cheaper cost of labour in India has also been instrumental in boosting the outsourcing industry in the country. India Inc. (especially the pharma and software sectors) has already displayed its prowess by leveraging on its low cost advantage (both in manufacturing and labour) to boost its export potential - a trend, which is expected to continue in the future as well. To put things into perspective, labour costs in India are estimated to be around one seventh of the costs in the US. Also, in the context of the pharma industry, India has 6 times the number of trained chemists in the US at a tenth of the cost (Source: Nicholas Piramal).

    The challenges are...

    Quality of labour: While the rise in working age population is firmly in India's favour, what needs to be understood is that the quality of labour is more significant. This is because high quality labour ensures unlocking of productive capacities and technical progress, thereby contributing to higher growth. As can be evinced from the table below, India has a long way to go in terms of providing basic education as compared to some of its Asian peers.

    Education: India has a long way to go
    Country Primary (%)* Secondary (%)* Tertiary (%)*
    China 117.6 72.5 19.1
    Phillipines 112.4 85.9 28.8
    Thailand 98.5 77.3 41.0
    Indonesia 117.0 64.1 16.7
    India 116.2 53.5 11.8
    * Gross enrollment ratio in 2004
    Source: World Bank

    Literacy levels: While India's literacy rate (age group 15 years and above) considerably improved from 18% in 1951 to 61% in 2004, it nevertheless lags its Asian counterparts, which have a literacy rate of above 90%. Another feature to be noted is that there is a wide difference in literacy rates within the various states. For instance, while Kerala enjoys the highest literacy rate of 91% (2001), Bihar has the lowest literacy rate of 47% (2001). This means that the Indian government needs to place increased emphasis on education in a bid to further enhance the quality of labour in the country.

    Literacy levels: India at the lowest end
    Country Literacy rate (2004)*
    Malaysia 89
    Phillipines 93
    Thailand 93
    China 91
    Indonesia 90
    India 61
    Source: World Bank
    * Age group 15 years and above

    To sum up...
    The long-term growth story India is expected to remain strong with the GDP estimated to grow by around 7%-8%. Having said that, the government needs to lend more focus on improving the infrastructure and the level of education, if India has to sustain its growth momentum or may be even grow at a higher rate. This is only possible if the Indian government allots a considerable weightage of its public expenditure to the same.



    Equitymaster requests your view! Post a comment on "Economy: The demographic angle...". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)