India still has a demographic dividend. Can it create enough jobs?

India's fertility rate has fallen below replacement level, but the bigger question is whether the economy can create enough jobs and raise productivity before ageing pressures build

India's fertility rate has fallen below the replacement level of 2.1, which has prompted renewed debate about the future of the country's demographic dividend. Yet the decline does not mean India is on the verge of ageing like Japan or South Korea. India remains one of the world's youngest major economies, with nearly two-thirds of its population still in the working-age bracket.

 

According to the latest Sample Registration System (SRS) Statistical Report, people aged 15-59 accounted for 66.4 per cent of India's population, while those aged 60 and above made up 9.7 per cent. The country's total fertility rate stood at 1.9 in 2024, below the replacement level needed to maintain population size over the long term.

 

 

India's fertility rate has fallen by almost two-thirds since the early 1970s and is now below replacement level

 

The question, therefore, is no longer whether India has enough people entering the workforce. Increasingly, it is whether the economy can create enough productive jobs, raise labour force participation, improve skills and boost productivity before ageing pressures become more pronounced. 

The demographic window is narrowing, not closing

India's demographic dividend has long rested on a favourable population structure: a large share of working-age people relative to dependents. Such a transition typically supports economic growth by expanding the labour force, which results in increasing savings and reducing dependency burdens.

 

The country's demographic transition has been unfolding for decades. India's crude birth rate has fallen from 36.9 births per 1,000 population in 1971 to 19.1 in 2022, which shows a sustained decline in fertility. The SRS report estimates the total fertility rate at 1.9, while the National Family Health Survey-6 (NFHS-6) puts this figure at 2.0.

 

India's Birth Rate Has Also Been Falling
Year	Crude Birth Rate (per 1,000 population)
1971	36.9
2013	21.4
2022	19.1
2024	18.3

While fertility has now slipped below replacement level, experts say the country's demographic advantage remains intact for the near future because of population momentum.

 

"Although fertility rate has declined below replacement level across India, the country's young workforce remains larger than many other major economies and will continue to exhibit a demographic advantage through 2030 or early 2040," said Dr Kanishk Agrawal, chief technology officer at Judge Group India, a workforce solutions and IT consulting firm.

 

However, he cautioned that demographic strength alone will not guarantee growth. "The abundance of young people cannot continue to be the sole driver of India's economy," he said, adding that future gains will depend on workforce participation, non-farm employment opportunities and productivity improvements.

From demographic dividend to demographic challenge

The demographic dividend is not a permanent feature. As fertility declines and life expectancy rises, the age structure gradually shifts.

 

India remains young, but ageing pressures are building

 

India remains a relatively young country today, but ageing is expected to accelerate over the coming decades. According to projections cited by experts, the share of people aged 60 and above is expected to rise from around 10 per cent today to more than 20 per cent by 2050, with the elderly population reaching roughly 347 million.

 

Dr Bappaditya Mukhopadhyay, professor of analytics and financial economics, said while around two-thirds of India's population is currently in the working-age bracket, the share of those aged above 60 is projected to exceed 20 per cent by mid-century. This, he said, puts enormous pressure on healthcare and social welfare schemes.

 

Prof Sunil Rajpal, faculty of economics and chair of the Centre for Research in Wellbeing and Happiness at FLAME University, pointed out that ageing-related health challenges could become increasingly costly.

 

"Studies have shown that more than half of the Indian elderly report having at least one chronic ailment," he said, adding that ageing will require greater attention to healthcare financing, retirement systems and social security.

 

The challenge, experts say, is not ageing itself but whether India can prepare for it while it still has a favourable demographic profile. 

Jobs will determine the outcome

A growing working-age population is often seen as an economic asset. But economists have long argued that demographic dividends materialise only when workers find productive employment.

 

Even though 66.4 per cent of the population remains in the working-age group, demographics alone cannot guarantee faster growth. Employment generation, labour force participation, skill development and productivity will decide whether the demographic advantage translates into higher incomes.

 

Experts said employment generation must become the central objective during the remainder of India's demographic window.

 

"Labour-intensive manufacturing, MSMEs, logistics, tourism, healthcare and modern services sectors can absorb large numbers of workers entering the labour market," said Agrawal.

 

He added that increasing female labour force participation could expand India's effective workforce and support growth.

 

Rajpal echoed that view, saying demographic advantages do not automatically translate into prosperity.

 

"Increasing the working-age population must be converted into productive employment, higher labour force participation, and sustained improvements in human capital," he said.

 

He warned that persistent workforce informality, low female participation and uneven education outcomes continue to limit productivity gains.

Productivity becomes the next growth engine

As workforce expansion slows, experts believe growth will increasingly depend on productivity rather than population growth.

 

Ameet Padiyar, founder of skilled workforce recruitment firm Skyljo, said India can no longer depend only on adding workers to sustain growth.

 

"India can no longer rely only on adding more people to the workforce; it has to get more value from the workforce it already has," he said.

 

According to Padiyar, both manufacturing and modern services will be central to this transition. Manufacturing will need workers who can operate in increasingly automated and digitised environments, while services are becoming more technology-intensive and knowledge-driven.

 

However, he said the current skilling ecosystem still has gaps.

 

"Many workers obtain certifications, but employers are still struggling with how to determine whether those workers can apply the skills to the actual work," he said.

 

As industries adopt artificial intelligence, automation and advanced manufacturing technologies, Padiyar said the focus must shift from measuring training participation to verifying actual workplace capabilities.

 

He identified vocational training, apprenticeships, digital infrastructure and industry-linked skilling programmes as key priorities for improving productivity. He also emphasised continuous reskilling and stronger systems to assess workforce readiness. 

Can India get rich before it gets old?

The broader question is whether India can achieve sustained prosperity before ageing becomes a larger economic constraint.

 

Agrawal said India enters this phase with several advantages, including strong economic growth, rapid digitisation, infrastructure expansion and deeper integration into global supply chains. Yet he warned that the country's per-capita income remains far below that of many nations that achieved high-income status before ageing accelerated.

 

"The main risk to India's ongoing success is therefore not a future demographic of older citizens but rather the slow creation of jobs," he said.

 

Mukhopadhyay made a similar point, saying strong GDP growth alone may not be enough if its benefits are not widely distributed. "Unless the fruits of growth are shared widely, the State will always have the burden to provide social security," he said.

 

Rajpal said the aim should be to move beyond a growth model driven by demographics. "The broader objective should be to transition from a growth model driven by demographics to one driven by productivity, skills and institutional strength," he said.

 

India's demographic arithmetic remains favourable. But the nature of the demographic dividend is changing. The next phase will depend less on how many people enter the workforce and more on whether they can find productive work, acquire relevant skills and generate higher output.