India is among a handful of South Asian countries that sits on a demographic gold mine, according to Deloitte’s latest “Voice of Asia” report. The country has a median population age of 27.3 years compared to that of 35 years for China and around 47 years for Japan.
It is estimated that India has around 390 million millennials and about 440 million in the Gen-Z cohort. About 12 million people are added to the working age population every year. Demographic growth is significant as it is intrinsically linked to economic growth and therefore, cannot be ignored.
Anis Chakravarty, Lead Economist, Deloitte India, explained that, "India will account for more than half of the increase in Asia’s workforce in the coming decade, but this isn’t just a story of more workers: these new workers will be much better trained and educated than the existing Indian workforce, and there will be rising economic potential coming alongside that, thanks to an increased share of women in the workforce, as well as an increased ability and interest in working for longer. The consequences for businesses are huge."
However, in order for India to reap the dividends of its demographic potential, it has to first equip its workforce with the necessary skills to contribute to the national economy.
Anis Chakravarty further adds, sounding a note of caution, “With the invasion of machines and improvement in robotics, India needs to pay special attention to skilling and reskilling its workforce with a focus on the changing nature of today’s jobs. In recent years, India has taken proactive steps to deal with the disruptions in the job market with the ‘Skill India’ initiative being one of them. That said, it needs to be a continuing process of upgrading skills in a rapidly changing environment.”
Much like India, Indonesia and the Philippines have also witnessed a steady growth in their working age population. With more and more young men and women joining the workforce every year, a new economic order backed by positive demographic growth has come into play.
While India and some Southeast Asian economies are seeing an increase in their working age population, most of Asia's nations are aging, and while this creates emerging challenges, aging populations will also generate a growth cluster of new business opportunities.
Aging to create a growth cluster of industry winners
Three big accelerators drive the industry opportunities in an aging Asia, with each building on the other are as follows:
- Asia is aging fast, with a billion people in the region to be aged 65 and over by the middle of this century.
- And the money being spent by and on aging populations will grow even faster than Asia ages, because the impact of new technologies and the on-going management of increasing chronic conditions means health care costs will rise faster than most other costs
- There will be a steady growth in old-age homes and retirement homes. This will lead to infrastructure and fresh capital infusion, resulting in more employment opportunities and better wages
”As is already increasingly evident in Japan, the surge in aging-related opportunities will be evident well beyond health care. Rapid aging in the Japanese population has changed the needs of people and the way businesses satisfy them. There has been increasing demand in sectors such as nursing, consumer goods for the elderly, age-appropriate housing and social infrastructure, as well as asset management and insurance,” notes Tsuyoshi Oyama, Deloitte Japan Economist.
Similar to Japan, much of China’s economic growth can be attributed to the abundant human capital they once had. As their workforce ages, China has acknowledged the need to increase their workforce, thus abolishing its one-child policy. Both China and Japan, sensing an impending crisis, are offering incentives to young mothers to have more than one child. However, this cannot resolve the issue alone.
To manage aging populations, the report recommends the following measures to deal with rising shortages in workforce and pre-empt the adverse effects:
- Increasing the retirement age: Fewer jobs are labour-intensive these days, while rising life expectancies are encouraging longer working lives, and today’s higher incomes are also encouraging people to work for longer. Fostering these trends can help the economic growth of those nations at the forefront of aging impacts – as is especially true of Hong Kong, Taiwan, Singapore, Korea and China.
- Incentivizing the participation of female workforce: Asia has far fewer women than men in its paid workforce. Accessing that untapped people power is a direct lever with which aging nations can boost their growth potential.
- Welcoming migrants: 2017 is a year in which the politics of migration remains contentious, but the economics of migration remain excellent. Those nations at risk of a demographic-driven growth slowdown should open further to immigration. Accepting young, high-skilled migrants can help ward off aging impacts on growth, but the critical issue is whether policy—and property prices—will allow this immigration to happen at sufficient scale.
- Increasing productivity and skill development: Productivity is just as much a contributor to economic outcomes as demographics. Governments can focus on education and re-skilling the workforce as a way to bolster the growth opportunities offered by new technologies.
India, with its abundant human resources, increasing foreign investments and rising disposable incomes, is on its way to becoming a global economic power. However, India needs to take a proactive approach to prepare its workforce for the changing needs of the market, thereby creating a new highly skilled workforce for the aging world.