Why I want to be an entrepreneur and start a Business School In India !
Nowadays no demographer worth his salt seems complete without a reference to the coming "demographic dividend".
What really is this demographic dividend?
The demographic dividend is a rise in the rate of economic growth due to a rising share of working age people in a population. This usually occurs late in the demographic transition when the fertility rate falls and the youth dependency rate declines. During this demographic window of opportunity, output per capita rises. It has been argued that the demographic dividend played a role in the "economic miracles" of the East Asian Tigers and that the economic boom in Ireland in the 1990s (the Celtic tiger) was in part due to the legalization of contraception in 1979 and subsequent decline in the fertility rate. In Ireland the ratio of workers to dependents improved due to lower fertility but was raised further by increased female labor market participation and a reversal from outward migration of working age population to a net inflow. Africa, on the other hand continues to have high fertility and youth dependency rates, which contribute to its economic stagnation. The magnitude of the demographic dividend appears to be dependent on the ability of the economy to absorb and productively employ the extra workers, rather than be a pure demographic gift.
The basic idea is what biz school students in their jargon call as a No Brainer(not to be confused with Accountancy exam that makes people NO BRAINERS!)
India has a population of 1200 million(1.2 Milliade thanks to Dirk my German A1 instructor), of whom nearly 60% are in the age-group 15 to 60 years.This is the "working age population".Since outside of this age group very few people work, it is reasonable to think that the remaining,are "dependents").A nation's "dependency ratio" is the ratio of the dependent population to the working-age population. In the case of India this turns out to be 0.6.On this score India does not look too different from many other developing countries. Bangladesh's dependency ratio is 0.7, Pakistan's 0.8, Brazil's 0.5( I will not mention about Germany if you are really curios mail me!).What is different about India is the prediction that it will see a sharp decline in this ratio over the next 30 years or so. This is what constitutes the demographic dividend for India.
India's fertility rate - that is, the average number of children a woman expects to have in her life time - used to be 3.8 in 1990.
This has fallen to 2.9 and is expected to fall further. Since women had high fertility earlier we now have a sizeable number of people in the age-group 0-15 years.But since fertility is falling, by 2020,this bulge of young people would have moved into the working-age category. And, since, at that time, the relative number of children will be small (thanks to the lowered fertility), India's dependency ratio would be lower.
It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan; and, by 2030, India's dependency ratio should be just over 0.4.
This would lead to many benefits.
First is the exponential rise in the relative number of bread-winners but the classical twist here is that, with fewer children being born, more women will now join the work force;FOR WOMEN WHO NEED ADDITIONAL QUALIFICATION (every one know goes to college the ROI on education has been proved to have infinite ROI in India, however there would be sudden need for additional vocational as well as the upper end managerial and business skills.
Hear ye all GLFM Fans- A more indirect but vital benefit for the economy is the effect this can have on savings(knock knock rate!).
Human save most during the working years of their lives. When they are children, they clearly consume more than they earn, and the situation is the same when they get old,therefore a decline in the nation's dependency ratio is usually associated with a direct proportional rise in the average savings rate.
India's savings rate as a percentage of GDP has been rising since 2000. It now stands at 33% which is comparable to the Asian super-performers, all of whom save at above 30%, with China saving at an astonishing near 40% rate.This savings growth is driven by improvements in the government's fiscal health and a sharp rise in corporate savings.But even if these factors disappear, the decline in the dependency ratio should enable India to hold its savings and investment rate above the 30% mark for the next 25 years.
Well the only counter I heard to this was last week at the Waxy's irish Pub when we guys went to celebrate Teresa' & Illiyas Birthday, I couldnt argue back because that Irish Bartender was Bigger Than I. Well he said "Bull Sheet Maet",Ireland's legalised contraception in 1979.This caused a decline in the birth rate, from 2% in 1980 to 1% in 199o. This caused a rapid decline in the dependency ratio.The phenomenal economic boom in Ireland thereafter, earning it the sobriquet "Celtic Tiger", is very likely founded in this fertility decline.(P.S: there is a conspiracy theory related to the Vatican but an Atheist like me would refrain from commenting further :) on this.)
This also exactly happened in Japan post the world war II( The economic resurgence both in Japan and as a matter of fact even Germany(inspite of ordoliberalism according to a half baked google expert like yours truly was PRECISELY because of this).I also would say the same with China in the late 1980s and early 90' however since I have a lot of friends (including my chinese- ex boss,ex colleagues,ex gf',ex beermates etc etc I would refrain further).
This is too good to be true its like India qualifying for the World Cup Soccer ? will it ever happen in India?
I was a derivatives trader,I have made many of my bets on my gut feel(Many wrong and some disasterously wrong) My gut feel this time says that India will benefit from higher savings and investment rates and this will be the 'only' trigger to boost India's high growth rate.
But really benefits of this will depend on how the nation performs on primary and secondary education (to make sure that the larger working-age population conferred by the demographic dividend are an educated lot) the manufacturing sector (which is needed to create job opportunities for the larger labour force) and most importantly the specialized management training(read MBA,executive programs ,specialized trainings etc).
This for a change has been reflected surprisingly pro actively by Policy makers in India,when the Indian Education minister said I thought it was just a political gimmick but when yesterday I came to know that India' largest Business group Reliance Industry believes that this is the way forward I am seriously thinking now.
It is in the nation's interest to reap as much as possible from the dividend so that it is robust enough not stymied later by the 'demographic echo'.
Venkat
P.S: DISCLOSURE" I come from a family of educationists my Grandfather started Chennai(Madras) first college for education for Women, my mother was a math prof (is emeritus with Forum d Analyst) my wife a lecturer and possibly about a dozen of my relatives in Education field(YA YA I AM THE ONLY BLACK SHEEP who keeps talking a lot in my family!) now I got a chance to prove them wrong! I intend to pitch this in the form of a Business Plan and garner partnerships , I hope to start with the GBS :)
P.P.S: this is not an effect of a 9.5 hour day of continuous classes including a 5 hour session on Entrpreneurship!
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