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Of Rahul Bajaj and India's So Called Demographic Dividend

Sep 27, 2016


One of the things that I have recently been asked more than a few times is that why isn't anyone else talking about the demographic dividend point that I have been making in the recent past.

The basic argument is rather straightforward. At a certain point of time, countries reach a stage where their working population grows much faster than their overall population. This means that there are more people who can earn and spend than those who need to be taken care of.

This trend typically lasts for two to three decades. When the people entering the workforce get jobs and save and spend money, the economy grows at a much faster pace than it has in the past. This faster economic growth helps pull out more and more people out of poverty. This is referred to as the demographic dividend.

An important assumption in the demographic dividend is that people who enter the workforce and are actually looking for jobs, are able to find jobs.

In the Indian case, around one million individuals are entering the workforce every month. This means around 1.2 crore individuals are entering the workforce every year. This will continue to be trend over the next couple of decades. More than 54 per cent of the country's population is under 25 years of age.

If this demographic dividend needs to be cashed in on, there need to be jobs for these people. Also, if a bulk of these people need to find employment, the jobs need to be in the unskilled and the low-skilled space.

The question is, are enough jobs being generated for the million Indians entering the workforce every month? The answer is no.

This is the basic point I have been making over the last few months. And this has led to the question, as to why others are not talking about it.

While, I have no control over why others are not talking about what I am talking about, it took me a while to understand why people are asking the question.

The way the human brain works, most of us deem something to be important only if more than a few people are talking about it. In this case, it seems I am the only one rattling on and on about an issue. And given that the question is, is it important enough? Or is it something which one cranky guy seems to have gotten into his head. Making that distinction is important. And this is where external validation comes in. Or whether others are also talking about the same thing.

This phenomenon of seeking external validation is clearly visible in the stock market. Most retail money comes in when the markets are at their peak. And most people get totally disillusioned about investing in the stock market once the market has bottomed out.

That's how human psychology works and I really cannot do much about. The question is why are others not talking about the risk to India's demographic dividend? For the English language media, it is a question of us and them. People who are not finding jobs are not the ones who read the English language press.

Further, in India, nobody really stays unemployed. People do find a way of doing something. Either they become a part of the agricultural workforce where the disguised unemployment is very high. Or they become what economists Abhijit Banerjee and Eshter Duflo call reluctant entrepreneurs.

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Over and above this, we do not have a good regular measure for unemployment. And given that unemployment rarely makes for news unlike a lot of other economic indicators like inflation, index of industrial production, fiscal deficit and so on.

Also, the demographic dividend not working out is a long-term trend. It is not going to have consequences overnight. Having said that, one consequence that has already started to playout is the land-owning upper castes in various parts of the country are now demanding reservations in government jobs.

I guess these are the reasons why others are not talking about this trend. Nevertheless, I recently came across someone who talked about what I have been talking about.

Industrialist Rahul Bajaj, wrote this in the 2015-2016 annual report of Bajaj Auto: "Each year, India is producing an extra 12 million young people of an age that makes them ready for the nation's workforce. Unfortunately, while there is no doubt that we as a country can increase our GDP growth initially to 8% per annum and then hit a steady-state of around 8.5% for several years, everything seems to suggest that employment will not rise at anywhere close to that rate of growth."

I don't really buy the fact that India will be able to grow at a steady rate of 8-8.5 per cent per year, for several years. Very few countries have been able to grow at a rate of six per cent or more for a long period of time. Hence, there is no reason for us to assume that we will grow at 8-8.5 per cent, consistently.

Nevertheless, I agree with everything else that Bajaj has written. As he further writes: "Indeed, all recent data across most manufacturing and service sector activities show that employment elasticities (namely, the percentage increase in employment for a percentage growth in value added) are not only less than unity, but often negative. Matters worsen if you juxtapose significantly greater skill and multi-tasking needs of the future with the inadequate educational and technical abilities of many who are entering the labour force - thanks to years of neglect of our schools, colleges and technical and vocational training institutions. How then can we expect to employ the majority of our youth even when we attain higher growth? And what will this do to inequality and social tensions? I don't have ready answers. But as a nationalist in his seventh decade, I am concerned."All I can say to conclude this is that like Bajaj I am very concerned.

Vivek Kaul is the Editor of the Diary and The Vivek Kaul Letter. Vivek is a writer who has worked at senior positions with the Daily News and Analysis (DNA) and The Economic Times, in the past. He is the author of the Easy Money trilogy. The latest book in the trilogy Easy Money: The Greatest Ponzi Scheme Ever and How It Is Set to Destroy the Global Financial System was published in March 2015. The books were bestsellers on Amazon. His writing has also appeared in The Times of India, The Hindu, The Hindu Business Line, Business World, Business Today, India Today, Business Standard, Forbes India, Deccan Chronicle, The Asian Age, Mutual Fund Insight, Wealth Insight, Swarajya, Bangalore Mirror among others.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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11 Responses to "Of Rahul Bajaj and India's So Called Demographic Dividend"

S Ramakrishnan

Sep 28, 2016

There are lot of jobs out there both skilled and unskilled.But every govt is working at snails pace .For eg.Railways can speed up new projects on a war footing with massive investments,but govt squanders money on already well paid govt servants.Imagine each govt servant getting minimum of 8000 ₹ including pensioners .So straight away using this money you could have employed 50 lac people EVERY YEAR.P public sectors,Banks the story goes on.It is like water water everywhere but not a drop to drink.PS I am a govt pensioner.


Vinod Upot

Sep 28, 2016

Rahul was downright alarmist in his introduction and ended up doing exactly what he blames the media of. While they push stories that suit their cause, here was Rahul pushing Vivek's letters, coz it suits his company.

I wish Vivek didn't come on video. What a let down. Below average speaker. He better remain with his writings.

For anyone regularly reading papers like the Economic Times. the Mint and Business Standard, the demographic dividend issue raised in this talk, is nothing new. To me you guys just found an excuse to promote Vivek' letters.

I've been your subscriber for years and owe it to EM for quite some money that I've made in stocks. There's quite some credibility that you have established over the years but I'm afraid you seem to be in a hurry to destroy it. While much of the daily write up's tell you of what other letters already have, your incessant reminders of your never ending 'last and final deadlines' are really damaging your cause and credibility. How can you come out with special offers every few months? Strapped for cash??? Don't forget credibility is everything in the business you are in.

Yes, I've read your terms of views. Don't publish this. I don't want you to. As long as you consider my views and take appropriate steps.


Jayant Gharpure

Sep 28, 2016

I would like to add
Ultimately this problem return to population growth. It will be impossible to match addition to work force with creation of jobs.

Has NIttimAyog not made any projection jobs potential in different sectors of economy & importantly does our present education system will produce employable n
Man force


Naresh Kumar Sharma

Sep 27, 2016

Can you give some measures which will increase employment opportunities


Goteti, lakshminarasimharao

Sep 27, 2016

Rahulbajaj dividend I want to know.



Sep 27, 2016

IIP growth is negative for very long time. Most of the jobs will be generated in industry and it is barely growing. Moreover, government is not at all concerned.

Yes, service sector is growing handsomely. Probably most of the jobs will be generated in India's investment banks or IT industry in India.



Sep 27, 2016

Hi Guys,

1.Vivek accepts " Every person in India, is employed". What else, you DESIRE? Can you compare India with Pakistan, Army driven China, Hunger & disease striken African Countries?
2. The skill-development Program of NaMO! (Did anybody comment on such topics, when Congress was ruling? Why?
3.Pav-Bhaji /Dosa Vendors/ Entrepreneurs, Real-Estate workers (Unskilled), Electricians, Plumbers, Carpenters? Auto Mechanics? Who trained These people?
4.Are these people & House-keepers, Maids: are there Services included in GDP..?
5. We need to project Positive points of India! (Of course, You can CLAIM credit for Negative Projection....)!!!

Like (1)

jayant Gharpure

Sep 27, 2016

I was thinking on same lines but knew - as no entity nobody will publish it. It is indeed difficult task to generate 1.2million jobs year after year. One way could be to employ 2 person for one job with reduced man hours& splittung salary. Presently the salary levels are high. Service sector is one area where employment potential is high.

Like (1)

Girish Anant Patkar

Sep 27, 2016

Like Mr Bajaj and yourself , the government is also seized of the matter. The thrust areas " Make In India", "Skill India", "Stand up India" are all intended to create employment. I believe that if banks come out of the mess they are in and we can achieve a consistent healthy growth in Manufacturing GDP, we should be able to largely address the employment conundrum !


Like (1)

Dharmaraja Krishnan

Sep 27, 2016

This is exactly on the same line people like me, and you are thinking for the last 2 years. You need to create employment for people to earn. When they earn, they spend and this is how economy moves. But in our country, there is hardly any new employment being created. Day by day jobless people are increasing. And the majority of the middle class/lower middle class spending power is reducing, due to inflation. They are not able to spend or set aside an amount for contigency and non contigency or impulsive purchases(this makes goods & services wanted or unwanted move forward).And this is how " Achhe Din Ayenge" is a day dream.

Major portion of the earnings by the government is spent on administration and maitaining the politicians and beauracrats by means of salaries, innumarable benefits, pension for life time for the entire administration. Do we need so many mantries, can we cut down on the number of peoples representatives like MLAs, MPs, Nagar Sevaks, corportors, commissioners ect. The figure is huge in outgoings for the country. And as such the peoples representative do not bother for the people once they are elected. Then why do we need so
many numbers. It is the tax payers money that is being spent on them. Size down the government and the beauracrat working for it. The amount saved from this expenditure, can flow in to development, education, small scale industries and so the employment. At whims and fancies, the Ministers manage to get a pay hike every year. But are they really working for it. And for the Government servants, they have 5th commision,7th commission ect. As such the government servants do not work and time and again they mange to loot the public money by raising pay commissions. And the let the country be really handled by few capable hands and not excuses that we are facing today.

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