SUMMARY

There exists a close and two way relationship between

population growth and economic development in a country. The
population in one way constitutes a source of labor that could be
utilized to boost the country's production. On the other hand, it could
also be seen as a consumer group that uses and exhausts a large
quantity of the country's resources. Social scientists have long argued
over the impact of population growth on economic development. The
debate has oscillated from the "pessimistic view," which argued that
the population growth restricts economic development (credited
largely to Malthus), to the "optimistic view," which argued that
population growth fuels economic development (for example, Kuznets
1967). The debate seemed to have finally settled in favor of the
"neutralist view," i.e., population growth does not matter for growth
prospects.

Bloom and Williamson (1998) argued that the earlier debate

missed a critical dimension of the population dynamics, namely, the
changing age structure. According to this view, as countries pass
through various phases of demographic transition from high fertility
and high mortality to low fertility and low mortality, the age
composition of a country's population changes. During this
demographic transition, all countries have a demographic "window of
opportunity" when the growth in the working-age population is
greater than the growth in the total population. This bulge in the
working-age population is referred to as the "demographic dividend."
Using cross-country data, Bloom and Williamson (1998), Bloom et al.
(2002), among others, show a positive relationship between the
growth rate of the share of the working-age population and economic
growth. Change in the age composition matters because different age
groups have different economic behavior.

Though there is ample literature discussing cross-country

experiences of demographic transition and its implications for
growth , there is little literature on differences in demographic
transition across regions within a country. However, there has been a
keen interest in the demographic trends across-states in India. At
present, there is much excitement over the Indian demographic
transition and its possible effects on growth. Lee(2003) estimates that
even if income per person remains constant, a decrease in dependents
will boost income per capita by 22%. The issue of divergence between
Indian states has also been discussed in the literature. Bose (2007)
finds that there is a growing North-South divide in India in terms in
most demographic and health dimensions.

Economist Michael Kremer (1993) claimed that population

growth is a key driver of advancing economic prosperity. More people
imply more scientists, inventors and engineers that contribute to
innovation and technological progress. This leads to an improved
standard of living. Bloom and Williamson (1998), Bloom, Canning,
and Malaney (2000), Bloom and Canning (2003 and 2008), and
Mason (2001) have investigated the nature and magnitude of this
contribution of age structure to economic growth. The literature in this
area also makes clear that there is nothing automatic about the effects
of demographic change on economic growth. Changes in age structure
simply affect the supply-side potential for economic growth.
Capturing that potential depends on numerous other factors such as
governance, macroeconomic management, the depth and efficiency of
financial markets, and policies in the areas of trade, education, health
and labor.

Effect of population growth on economic development has been

a matter of debate all along the history of economic thought. Debates
surrounding the consequences of population growth on the pace of
economic development have, since Malthus, been both vigorous and
contentious. While pessimism has dominated the lexicon of popular
and, scientific discourse, swings in thinking have from time to time
occurred. Malthus began with two fixed laws of our nature. First, men
and women cannot exist without food. Second, the passion between
the sexes drives them to reproduce. He explained that, if unchecked,
people breed geometrically. But, the production of food can only
increase arithmetically. The natural inequality of the two powers of
population and of food production in the earth. “would create great
difficulty that to him appeared insurmountable. After Malthus first
published his essay in 1798, a storm of criticism erupted. The
optimists called his vision of unavoidable mass starvation a “doctrine
of despair”. The Industrial Revolution and the use of machinery in
agriculture greatly multiplied what each factory and farm worker
could produce.

By 1900, in many parts of Europe, the fertility rate began to go

down. This meant smaller families. In countries that have undergone
modernization, married women often choose to have a job and a
family, but with only one or two children. Thus as a nation
industrializes and its people become better educated, the fertility rare
seems to drop, which means smaller families and a slowing of
population growth. The old debate between the optimists and the
pessimists appeared to be over. The optimists seemed to have won.
But after World war II, the world’s population accelerated. It took
more than 100 years for the population to grow from 1 billion in
Malthus’s time to 2.5 billion 1950. It took only 25 years, however, to
add another 1.5 billion between 1950 and 1975.

The increasing world population alarmed some

environmentalists. Concerns about rapid population growth voiced by
demographers, social scientist, and other were based largely on the
assumption that such growth would “serve as a break” on economic
development. Fears of an overpopulated planet became a hot topic
when Paul and Ann Ehrlich published the Population Bomb in 1968.
Ehrlich pronounced “The battle to feed all humanity is over”. In the
1970s, however, biologists developed new high yield strains of wheat,
rice and other food crops that dramatically boosted harvest. Many
agricultural experts called this the Green Revolution. Thus, food
production again kept up with population growth. But this came at a
cost. Today the population pessimist emphasize the environmental
damage and depletion of natural resources caused by an
overpopulated planet. About 40 years after Paul and Ann Ehrlich
published the Population Bomb, the world's population has nearly
doubled again. The pessimists call for stepped up UN and national
programs to bring down the fertility rate in poor developing countries.
Recent history has cast further doubt on the pessimists’ theory. In the
last 30 years- during which the world’s population has doubled per
capita income have increased by about two-thirds. Famines have
occurred, but Ehrlich’s “hundreds of millions” of people have not
starved. The famines that have occurred were largely caused by
poverty and lack of funds within a section of population to buy food
rather than by any absolute shortage of food. Technological progress,
in both agriculture an industry, has been more rapid than during any
other times in human history.

These trends have supported the view of a group of population

optimists who have sought to promote the idea that population growth
can be an economic asset. Simon, in his influential book The
Ultimate Resource (1981), showed that rapid population growth can
actually lead to positive impacts on economic development. Today's
population optimists point out that while the total number of people in
the world is still growing up, the yearly rate of population growth has
been declining sharply, except in poor developing countries. The
optimists expect the world's population to peak at about 9 billion in
2050 and then gradually go down. The optimists predict that by 2050
a majority of countries, including many poor developing ones, will be
at or under the 2.1 fertility replacement level. There is no reason,
according to the optimists, why inventive scientists and others cannot
develop new nutritious food crops, discover energy alternatives, or
use technology to heal environment. In recent years most economic
analysists have examined the statistical correlation between
population and economic growth and found little significant
connection. Though countries with rapidly growing population tend to
have more slowly growing economies, this negative correlation
typically disappears or even reverses direction once other factors such
as country size, openness to trade, educational attainment of the
population, and the quality of civil and political institutions are taken
into account. The neutralist theory has been the dominant view since
the mid-1980s. Alan Kelly has suggested that population neutralism
has in fact been the predominant school in thinking among academics
about population growth for the last half country.

Proponents of population pessimism, optimism and neutralism

all fall back on theoretical models and more or less robust data to
support their positions. All of these theories, however, tend to ignore a
critical dimension of population dynamics: populations’ evolving age
structure. Each age group in a population behaves differently, with
distinct economic consequences: The young require intensive
investment in health and education, prime-age adults supply labour
and saving, and the aged require healthcare and retirement income.
When the relative size of each of these groups in a population
changes, so does the relative intensity of these economic behaviours.
This matters significantly to a country's income growth prospects.
Understanding the relationship between population change and
economic growth has taken on immense significance in recent years
because of demographic trends in the developing world. Policymakers
should benefit from a clearer understanding of relationship between
economic development and the shifting age structure that results from
the unfolding demographic transition.

Change in the age structure of the population of any country has

an impact on the economic growth of that country. Countries with
shrinking number of children and large shares of working age people
can raise their rate of economic growth. This positive impact of large
working age population relative to non-working age population is
referred to as demographic dividend. This usually occurs in the last
stage of the demographic transition when the fertility rate falls while
the dependency ratio declines. Demographic transition is an empirical
fact witnessed all over the world. The theory of demographic
transition postulates a three stage sequence of birth and death rates
typically associated with economic development. The first stage is
largely associated with underdeveloped agrarian economy. In this
stage of demographic transition mortality rate as well as fertility rate
is very high. In this stage of the society the actual rate of growth of
population is not very high since high birth rate is balanced by high
death rate. In the second stage birth rate remains high but death rate
begins to decline rapidly. This accelerates the growth of population.
As a result, in the third stage birth rate starts falling. Since the death
rate is already low, growth rate of population declines. After some
time population growth shows stagnation.

Changes in age structure are an inevitable consequence of

demographic transition. This change in age structure brings
opportunity for economic growth termed as demographic dividend. A
favorable age structure has positive impact on economic growth. Until
the working age population switches to decline, a country’s potential
to increase its labour input grows. People in the working age are often
more productive than those outside this group. At the same time
workers produce more than they consume. Thus they save a part of
their income. This raises the savings rate and increases the domestic
resources available for productive investment.

Benefit of demographic dividend may be divided into two

classifications first and second demographic dividend. When the share
of working age population in total population becomes  large this
raises the rate of economic growth. This is referred to as the first
demographic dividend.  In order to benefit fully from the first
demographic dividend, it is necessary to have such labour market and
such labour policies that will enable the increasing working-age
population to be absorbed. In the later stage of the demographic
transition, the working-age population starts declining and the relative
share of old-age people gradually increases, this stage of
population aging also boots savings rate. The effect of this rise in the
savings rate is the second demographic dividend. At this stage of the
aging process, the ratio of capital per worker increases.

The positive impact of the increase in the share of working age

group on economic growth has been explained by many economists
and experts using the economic life cycle approach. The economic life
cycle hypothesis states that the level of income varies systematically
over the different phases of a person's life cycle. A child is net
consumer however, a person becomes a net producer after moving
into the working age group. The economic life cycle approach shows
that population concentrated in working ages can support a higher
level of consumption than the population concentrated in the
dependent ages whose consumption exceeds income. This micro level
behaviour has important implications for the country as a whole.
Change in population age structure are important because people earn
income and consume at very different level over the course of their
lives. Working age adults as a group produce more than they
consume. On the other hand, children and elderly people consume
more than they produce. The population age structure in combination
with other basic feature of the economy determine the size of the
demographic dividend.

There are various channels through which a growing share of

working age population in total population can have a positive impact
on the growth rate of an economy. The first is an essential mechanical
effect based on the regular and inevitable aging of the baby boom
generation. When this generation enters the working age of 15- 64 the
supply of labour increases considerably. If labour market can absorb
the increasing number of workers, per capita production increases.
Demographic transition also encourages savings both in an accounting
sense as well as in behavioural way. This improves the prospect of a
country for investment and growth. At the same time, improved health
and longevity make savings easier and more attractive. Thus, a higher
share of the population in working age group makes higher level of
savings possible which can provide capital to boost economic growth
of the country. The demographic transition has significant effect on
investments in human capital. Investment in education and health
make work force more productive and thus raises the stock of human
capital. All this translates into increased production per worker and
raises the rate of economic growth.

The growth of population in India has been fairly in tune with

the classical theory of demographic transition. During most of the
nineteenth century India was in the first stage of demographic
transition which drifted into the twentieth century until 1921, marked
by more or less stagnant population. After 1921 India entered into the
second stage of demographic transition. After 1921 death rate began
to decline very sharply. But birth rate remained high and declined
very slowly. Due to high birth rate and rapid decline in death rate
there was an acceleration in growth rate of population. It is now
widely believed that India has entered the final stage of demographic
transition which is normally characterized by rapidly declining
fertility.
 Currently there is much excitement over the demographic
transition in India and its possible effects on growth. The trends in
India's demographics show that India is in the middle of major
demographic transition. Dependency ratio is gradually falling and
working- age ratio is increasing. More and more women are entering
the labour force, further lowering the dependency ratio. India's
working age population will surge to maximum between 2020 and
2050 . India will remain among the youngest nation in the world even
in the next 15 years and half of India's population will be below the
age of 30. Demographic dividend for India is considered to be
substantial. It is estimated that from 1970s onward between 40 to 50
percent of per capita income growth was attributable to the ongoing
demographic dividend. While policy reforms had an important role to
play in the growth acceleration starting in the 1980s, but this was less
than commonly perceived once the concurrent rise in the working age
ratio is taken into account.

Taking aggregate figures of the country at its face value would

not give an accurate picture of the different changes taking place in
India. The overall scenario conceals regional variation across states.
Overall the demographic window of opportunity opened in the 1980s
and is expected to continue for some decades in future. But the
transition is not taking place evenly in all states within the country.
The implications of difference in demographic transition among states
are evident from differences in age structure for various states.
Differences in key vital statistics across states is reflected not only in
spatial variation in the growth rate of population and evolution of the
age structure but also in the growth of the working age population in
total population and average annual growth rate in the share of the
working – age population for the same states.

For the sake of simplicity in study, experts have classified

different states in two groups of low growth rate states and high
growth states. The demographically advanced states ‘leaders’ include
Kerala, Tamil Nadu and Karnataka. The states left behind termed
demographically laggards include Bihar, Madhya Pradesh, Rajasthan
and Uttar Pradesh. The divergence between these two groups of states
in socio-economic development has commonly become known as in
North-South divide. It is but natural that all Indian states are not
receiving demographic dividend evenly and simultaneously. the best
performing leader states have also reaped enormous demographic
dividend. In the 1980s per capita income growth generated by higher
working age ratio was 2.4% per annum which increased two 3.0% in
the 1990s. On the other hand the laggard states of Hindi Heartland
reaped a meager dividend, averaging only 0.6 percent in the 1980s
and zero in the 1990s after remaining negative in the 1960s and
1970s. This gap explains a substantial part of divergences between
leaders and laggards in differential growth rate in per capita net of the
demographic dividend.

From the above discussion it is evident that there is a positive

effect of a large working age population on economic growth and
Indian states with a higher ratio of working age population grew faster
than the rest. The leader states have already received most of the
demographic dividend, the growth in their working age ratio is
declining and their window of opportunity is now gradually closing.
On the other hand, laggard states have only just started experiencing
rapid growth in their working age ratio and their window of
opportunity has opened only recently. Hence the demographic
dividend of India in future will depend on whether the BIMARU
states will harness the demographic dividend and use the window of
opportunity or whether they will forego the chance of using it
effectively.

Bihar like other parts of the country has entered that phase of
demographic transition in which fertility rates are gradually falling
that is leading to bulging in the working age population. As Bihar is
experiencing a decline in fertility, it is expected that demographic
dividend will raise the economic growth of the state. In Bihar there
has been a gradual decline in total fertility rate. It declined from 5.7
births per woman in 1981 to 3.6 in 2011. Consequently, the state has
witnessed a decline in youth dependency ratio. Though the ratio of
elderly dependent has increased but not significantly. As a result, the
ratio of working age population is increasing. The proportion of
working age population in total population increased gradually from
51.2% in 2001 to 55.8 percent in 2011. The proportion of young
dependent decreased from 42.1 percent to 37.2 percent during the
same period. Though the proportion of elderly people increased
marginally but the total percentage of dependents declined from
48.8percent to 44.2 percent during this period. The trend is projected
to continue in the coming decades.

The age structure of Bihar indicates that the population is still

in early transitional stage. Consequently, Bihar has a reasonably
higher young-age dependency ratio compared to overall India because
of high proportion of infants and children. The fertility rate in Bihar is
still very high. The decline in fertility rate has been relatively slow
and is higher compared to fertility rates in southern states and all
India. Hence Bihar is decades behind the leading states in reaping the
fruits of demographic dividend. Presently dependency ratio in Bihar is
about one and a half times higher compared to the leading states.
Bihar is lagging about four decades behind the leading states in
dependency ratio and hence in reaping demographic dividend.
However, the process of demographic transition and increase in
working age ratio have started in Bihar.

In recent years the growth rate of Bihar economy has been

much higher than the national economy and higher than most of the
states. While different developmental programs implemented by the
government have undoubtedly been instrumental in accelerating the
growth rate of the state, rising working age ratio also seems to have
contributed to the growth acceleration. In Bihar demographic dividend
was zero during 1990- 2000. During 2000-2010 period, out of the
average annual growth rate of 4.3percent in per capita income the
contribution of growth in working age ratio was 0.2percent per
annum. This is very small and smaller than that in demographically
leading states. However, the total age- structure effects, the
contribution of growth of labour participation and growth of the ratio
of working-age people to total population increased from zero during
1980- 90 to 1.9 percent during the period 2000-2010. It can be said
that though demographic dividend is small in Bihar, but it has started
to emerge in recent years.

India has entered that phase of demographic transition in which

fertility rates are falling that is leading to bulging in the working age
population. The rising trend in working-age population is also
accompanied by a falling trend in the total dependency ratio. These
demographic parameters indicate that coming years will be a great
opportunity for India to harness demographic dividend. IMF has
calculated demographic dividend for the next five decades relative to
a counterfactual in which the working age ratio stays at 2001 level.
India's demographic dividend is expected to peak in the next decade
adding about 2 percent points to annual per capita income growth and
then start decreasing. Projections show that India's demographic
dividend has peacked in the present decade and will start declining in
the next decade. The calculations also suggest that over the current
decade the demographic dividend has been between 1.5 to 2 percent
points per annum.

A recent study on demographic dividend in India by United

Nations Population Fund (UNFPA) has thrown up two interesting
facts. One is that the window of demographic opportunity in India is
available for five decades from 2005- 06 to 2055- 56, longer than any
other country in the world. Second is the fact that this demographic
dividend window is available at different times in different states
because of the differential behavior of the population parameters.
There is a clear demographic divergence between North- Central and
South- Western regions. Most of the current and future demographic
potential is locked in the North- Central states largely located in Uttar
Pradesh, Madhya Pradesh, Bihar, Jharkhand and Rajasthan. As per the
population projections by UNPF, these five states will account for
more than half of the growth in the labour force in India. On the other
hand the southern states of Andhra Pradesh, Karnataka, Kerala and
Tamil Nadu will witness a decline in their contribution to the increase
in total population. Difference in the growth rate of working age
population in different states will result in change in the share of the
working age population in total population across state. Peeping into
the future, some states will continue to see an increase in their share of
working age population in their respective population while the share
of other states is projected to start declining by 2026.

Of the two demographic dividends the first is largely a

demographic phenomena while the realization of the second
demographic dividend depends on social economic environment and
the policy regime. The first demographic dividend quantified in terms
of economic support ratio is being realized by different Indian state at
different times and varied pace of demographic transition. Economic
support ratio of India is likely to increase from 0.762 in 2011 to 0.876
in 2051 after peaking to the highest value of 0.885 in 2041. Kerala
will be the first state to reach the maximum ESR value of 0.898 in
2021. Three States Delhi, Punjab and Tamil Nadu will reach the
maximum value of ESR in 2026. Eight of 21 major states will enjoy
the highest ESR in 2031. These states are Andhra Pradesh, Gujarat,
Himachal Pradesh, Jammu and Kashmir, Karnataka, Maharashtra,
Orissa and West Bengal. Assam and Haryana will achieve maximum
ESR in 2036. Three newly formed states Chhattisgarh, Jharkhand and
Uttarakhand and the state of Rajasthan will enjoy the maximum value
of ESR in 2046. Three states Bihar, Madhya Pradesh and Uttar
Pradesh with high total fertility rate at present will be the last states to
reach the maximum value of ESR in 2051. These three states have a
huge potential to grow economically with a large share of working
age population and ESR in these three states will grow beyond 2051.
The estimated economic support ratio given above is based on the
prevailing labour force participation rate. The economic support ratio
may increase further if the labour force participation rate increases.
Proper investment in physical and human capital can raise the
economic support ratio and extend the duration of the first
demographic dividend.

There are many challenges in the way to reap the fruits of

demographic dividend. The ability of India and Bihar to seize the
opportunities made available by changing age structure and
demographic dividend will depend on the success of our efforts to
address the key challenges plaguing our economy. The biggest
challenge to harnessing the demographic dividend is providing
productive employment to the growing working – age people. India
has been witnessing a sort of jobless growth since the 1990s. Since
labour force growth is in excess of employment growth, labour
absorption has become a challenge. Nature of employment and the
productivity of those employed are also a matter of grave concern. As
per the government data 93 percent of employees work in the
unorganised sector. Productivity and hence wages in the unorganised
sector are low.

Employment opportunities in the unorganised sector recently

got a jolt, first by demonetization and then by a poorly conceived and
implemented goods and service tax. It is true that unemployment is
the cumulative result of many causes. The multiplicity of causes has
made the problem of unemployment more acute and critical.
Unemployment rate has reached 45 years high. If the unemployment
rate increases the so called demographic dividend, will remain
elusive. Labour force participation rate is very low in India. during the
two censuses from 2001 to 2011 there was a low rise in the work
participation rate in India from 39.1 in 2001 to 39.8 in 2011. During
2001- 11, the male works participation rate increased from 51.7 to
53.26 while the female labour participation rate declined marginally
from 25.6 to 25.2. In states of Uttar Pradesh, Bihar, West Bengal,
Karnataka and Uttarakhand the work participation rate is quite low
and is below the national average. Many previous studies have
empirically proved that female work participation rate has been
stagnant and it is very dismal in our country. The declining female
work participation rate in India from 2001 to 2011 and later period
calls for serious interventions from the government to achieve the
most out of the available window of the demographic dividend.
Improving labour force participation rate must be accompanied by
improving female workforce participation rate.

Currently most of the Indian workforce is untrained and

unskilled. The World Bank Enterprise Surveys 2014 revealed that the
percentage of firms offering formal training programmes for its
permanent, full-time employees in India is just 35.9% compared to
China’s 79.2%. In India, the broad picture shows a lack of trained and
skilled quality labour contributing to poor demographic dividend
realization. Only 17.92% of persons in the age group 15- 59 years
have received or were enrolled in some type of vocational training in
the country. With about 75.8 percent of the workforce not having
received any form of skill training speaks volumes about the inability
of these people to get organized sector jobs. Several studies have
highlighted huge demand-supply skill gap in different sectors in India.
Huge gap exists between the industry requirements and the level of
skills of workers due to varied reasons including inadequate training
infrastructures, inadequate mix of skill and education, outdated
curricula, limited industry interface, and limited stands etc. To gain
the benefits of demographic dividend, India must impart required
skills to its workforce.

Education is very important to build up the human capital so

that skilled workforce is available which can innovate and promote
faster growth. The condition of education in India at all levels,
primary, secondary and higher education is deplorable. The largest
part of Indian school is of poor quality. Teachers are inadequately
prepared, weakly motivated, poorly paid and frequently absent. The
situation in higher education is even more problematic for India's
participation in the global knowledge economy. In the age group of
18- 23 years, which is deemed to be the age group of higher
education, the proportions of Indian youth that have access to higher
education is very low. The challenge is that of improvement in the
quality of higher education. First, the curricula of most courses in the
most of the Universities are seriously out of alignment. Second, a
discomfortingly large proportion of college teachers are blissfully
unaware of the advances in their own subjects. Third, there is lack of
required infrastructure and needed facilities in most of the educational
institutions. Fourth, there is a lack of integration between the
government, academia and industry. Another dimension of higher
education in India is affordability. Yet another dimension of higher
education in India is employability. There is chasm between the
evolving social and industrial needs and the kind of higher education
being imparted and this is widening. This raises the question of
relevance of higher education that is being provided in the country.

Improvements in public health are at the heart of demographic

transition. Demographic transition starts with improvements in public
health. Improvements in public health also ensure a healthy workforce
which can undertake Schumpeterian activities. Health care system in
India like the education system is in deplorable condition. Health
expenditure in India, both government and private taken together was
3.53 per cent of GDP in 2017 which is lower than the Sub-Saharan
Africa (5.18%) in the same year. The total health expenditure as
percentage of GDP in India is among the lowest of all the countries in
the world. The result is that India ranks among the highest in
malnutrition among children. Though there as various health care
plans in the country but they are not properly implemented. Proper
strategies for health care are a must in order not to turn demographic
transition into a demographic catastrophe.

The dependency ratio is one of the measures that gives an idea

about the demographic dividend. However, the conventional formula
used to find dependency ratio has many discrepancies. But when only
workers are taken in the denominator, the dependency ratio in India
becomes very high. The overall dependency ratio in India decreased
from 67 in 2001 to 58 in 2011. But it rises to 156 when dependency
ratio is calculated by taking only workers. When only main workers
are considered in the denominator the dependency ratio becomes very
high. The main worker dependency ratio increased from 229 in 2001
to 234 in the census year 2011, signifying a fall in the percentage of
main workers during the two time periods. This increase in the main
worker dependency ratio is a hinderance in the way of realizing the
potential of India’s demographic dividend.

Since time immemorial a large majority of the people, the so

called backward classes and Dalits continue to be deprived of their
rightful place in the Indian society. The continuation of age- old
division of labour along the rigid caste lines has no doubt given rise to
the lack of flexibility and mobility which is the very essence of the
development process. If a large majority of the population is denied
the educational opportunities to build their productive potential and if
the bulk of the society is denied the opportunity to channelize their
potential into higher productivity, confining them to traditional menial
jobs on caste lines, the nation cannot expect to realize its own growth
potential in a sustained manner.

According to official population projections, differences in

demographic transitions across states are likely to be exacerbated in
the future. The BIMARU states have been the slowest in their
demographic transition and are the slowest growing states as
measured by growth in per capita income. Whether India will be able
to make the most of the projected increase in labour supply will rest
critically on the ability of these states to provide complementary
conditions for growth and generate gainful employment opportunities.
The failure of these states to create conducive conditions for providing
the additional labour supply with gainful employment has the
potential to turn the demographic boom into a bane. Challenges in the
way of reaping demographic dividend in India apply more seriously in
Bihar Unemployment rate in Bihar at 10.2 percent was almost double
the national average in the year ended June 2019. In normal times,
millions of labourers, skilled and unskilled, migrate to other states to
get employment opportunities. So lack of unemployment
opportunities is a big hindrance in reaping the fruit of demographic
dividend in the state. Work participation rate in Bihar is quite low and
it is below the national average. But in Bihar female work
participation rate was mere 19.07 in 2011 while for overall India it
was 25.51. Worse, Bihar is among few states experiencing decline in
female work participation rate.

In Bihar, there is limited capacity for skill development in terms

of SDCs, number of trainers, assessors, funds available for
formulation, implementation and monitoring of skill development
schemes. Lack of skilled manpower is a big challenge in realising the
demographic dividend in Bihar. There is a crisis in Bihar’s primary
education system. Bihar has about 37 percent fewer teachers than it
needs in elementary education. The scenario of higher education in
Bihar is even more dismal. Bihar has an inadequate infrastructure for
higher education, creating huge mismatch between demand and
supply. The dismal situation of education in general and of higher
education in particular needs to be accorded higher priority if fruits of
enlarged working-age population are to be realised. The healthcare
services in Bihar are ailing. There are major gaps in the infrastructure
of health institution and health services are in shambles. Residents in
rural areas face difficulty in getting even primary level health
services. Bihar is also facing an acute shortage of personnel with
severe shortage of medical and paramedical employees. Without
quantitative and qualitative improvement in education and health, the
state cannot attain high trajectory of growth.
 Dependency ratio is very high in Bihar. This ratio at 81.5 in
2011 is highest among all the States and Union Territories in India
even by the conventional formula using working-age population in the
denominator. The percentage of marginal worker who do not have the
opportunity to work throughout the year and cannot contribute to
savings is considerably high at approximately 38.5 percent of the total
workers. It is also observed that almost 53 percent of the workers are
agricultural labourers. Bihar is poor and lacking in infrastructural
facilities. Bihar’s density of roads per population is the lowest in
India. Over 50 percent of habitations lack all weather road
connectivity. Bihar’s installed power capacity is meagre 0.4% of the
national total while population is 9 percent of the total. Additionally,
most of the rivers and tributaries in Bihar are prone to flooding,
causing extensive damage every year. Poor and backward
infrastructure is the biggest stumbling block on the path of
development and challenge to reaping demographic dividend.

The financial resources of Bihar is small because the state has

undeveloped industry and service sector. Moreover, low
administrative capacity has weakened the ability of the state to collect
revenue. The weak administrative machinery has also led to low
utilization of development funds in Bihar. The unused funds given to
Bihar are transferred to more efficient states. This has resulted in
vicious circle starting from low fiscal resource base, leading to low
resource capacity to mobilise matching funds, low absorptive
capacity, low investment, poor infrastructure, low private investment
and low fiscal resource base.

Thus challenges of demographic dividend in Bihar are no

different than the challenges of demographic dividend for India.
Nature of challenges are the same both for India and Bihar. But
challenges for Bihar are even more serious than that of India. Given
the relatively more unsatisfactory performance, there is need to
restructure and reorient policies in the state and optimize their
functioning.