Pick up a speech of any politician in In­dia today. It is bo­und to be sprinkled with terms like “globalisation”, “liberalisation”, “inclusive growth” and “demographic dividend”. These ter­ms, which are being excessively used, have become hollow and lost any meaning; especially the last one. How real is the possibility of India cashing the demographic dividend cheque ? More importantly, is the dividend automatic ?

In order to answer the question, let us define the concept of the so-called ‘dividend’ and examine the key data and assumptions underlying it. Demographic dividend is a rise in the rate of economic growth due to a rising share of working- age people in a population. One must focus on the term “working” because it is a cornerstone of this hypothesis.

If one looks at the international database created by the US census bureau, population division, which was updated in December 2010, a clear picture will emerge. The working-age population is usually defined to be between 15 and 64 . On that basis, in 2011, India’s working-age population is 64.9 per cent and expected to rise to 67.2 per cent in 2021 and peak at 67.5 per cent in 2031, and then begin to decline gently in 2041 to 67 per cent and taper off at 65.3 per cent in 2050. This is what constitutes the “demographic bulge” for India, that is, the high percentage of young, ‘working’ population. Just for context, it is expected that, in 2021, the average age of an Indian will be 29 years, compared with 37 for China and 48 for Japan.

Let us look at other countries and examine how they are leveraging the demographic bulge and harvesting the so-called “demographic divide­nd”. The picture is troubling. A demographic bulge is actually contributing to tensions in North Africa and West Asia, where people aged 15-29 make up the largest share of the population. The new Egyptian pyramid that is attracting global attention is not among the ones in Giza.

It is the shape and pattern of the population's age structure — wide at the “young” base, narrow and pointed at the “ageing” top. In Iran, 15 to 29-year-olds account for 34 per cent of the population, 30 per cent in Jordan, and 29 per cent in Egypt and Morocco. (The US and India figures are 21 and 26 per cent, respectively.)

An interesting finding that has emerged from West Asia and North Africa is that education, which does not impart skills to the youth to prepare them for gainful employment is actually disastrous. It is critical to match the education of the workforce to the skills that the market requires and employers demand.

Here is a story from Iran and this might sound familiar in India. In Iran, the percentage of people with school-leaving degrees has scaled from 2.5 per cent to 10.5 per cent over the past 20 years. However, unfortunately, the education system has degenerated into “a low-quality giant diploma mill”, as described Djavad Salehi-Isfahani, an economist of Iranian descent at Virginia Tech. He also proclaims with almost telling prescience, “The more important consequence of the coming demographic shift, that is the rise of the adult population, would be rapid economic growth but only if — a big ‘if’ — the youth of these generations have accumulated the right skills, acquired positive attitudes toward work, and were ready to lead the country.”

In 1990, only about 2 per cent of their people aged 15 and over had post-secondary degrees. By 2010, the ratios were up to 6.7 per cent for Tunisia and 6 per cent for Egypt, according to Harvard University's Center for International Development.

The demographic bulge is a double-edged sword. And no one knows this better than our prime minister Manmohan Singh. Delivering an address on August 2, 2005, he said at the launch of the National Knowledge Commission: “Our youth can be an asset only if we invest in their capabilities. A knowledge-driven generation will be an asset. Denied this investment, it will become a social and economic liability. Hence, we must invest in bu­ilding the knowledge base of our coming generations.”

But these skills and knowledge must be relevant to the needs of the Indian labour market. The skill shortage in the Indian economy today is largely due to neglect of vocational education. An Asso­ch­am paper, published recently, revealed that nearly 300 million people of the 18-50 age group are unemployed beca­use they just do not have any marketable skills. At the same time, the scarcity of trained plumbers, carpenters and mechanics in Indian cities drains the economy of Rs 100 crore a year.

The services sector and manufacturing will not be able to absorb the vast numbers of unemployed youth, particularly in the rural areas. Investments in agriculture and agro-processing facilities and vocational training in these skills must be woven into our education strategy.

If we are not able to provide employment opportunities to our youth, our dreams of demographic dividend may turn into a demographic nightmare.

The writer is managing director of Deloitte Consulting, India.These are his personal views.