Demographic dividend occurs when the proportion of working people in the total population is high because this indicates that more people have the potential to be productive and contribute to growth of the economy.An increase in the working age ratio can raise the rate of economic growth, and hence confer a “demographic dividend.” People of working age are on average more productive than those outside this age group. Also, because workers save while dependents do not, a bulge in the working age ratio contributes to higher savings rates, increasing the domestic resources available for productive investment. In addition, the fertility decline that is the source of the changed age structure may act directly to induce greater female labor supply and increase attention to primary education and health .
At present, India is identified as undergoing the demographic transition. With a median age of 27.6 years and a dependency ratio of just a little above 0.55, a ‘demographic dividend’ in India is currently underway and if properly harnessed would bring India as a front runner in the global economy.
India’s working age population (15-64 years) is now in 2011 at 63.4% of the total, as against just short of 60% in 2001. The numbers also show that the ‘dependency ratio’ — the ratio of children (0-14) and the elderly (65-100) to those in the working age — has shrunk further to 0.55.
As fertility falls faster in urban areas, rural India is younger than urban India; while 51.73% of rural Indians are under the age of 24, 45.9% of urban Indians are under 24. However urban India still has a higher proportion in the key 15-24 age group than rural India.