India’s Demographic Moment by Nandan Nilekani

Strategy+Business,Oct 09

With the right conditions in place — education, entrepreneurialism, and environmental awareness among them — a young, eager, educated workforce can be the key to prosperity.

it’s clear that if a country’s colleges and schools are in good health and if a significant proportion of the population is graduating from them, the prospects of economic growth are promising. When conditions are right, large numbers of young workers can drive a nation’s growth to remarkable levels.This theory is known as the “demographic dividend,” a phrase coined by demographer David Bloom. He proposes that when young working-age adults comprise a is proportionate percentage of a country’s population, the national economy is affected in positive ways.

The economic advantage comes from young workers who are unencumbered by families or other responsibilities. As Bloom pointed out to me, the members of this dividend generation don’t have to spend their incomes on children, and they don’t worry as much as previous generations about financial security and health expenses. They may diverge from traditional career paths into more entrepreneurial directions, and when these risks pay off, the results for the economy are innovation, productivity gains, and rapid growth.

Now, looking ahead, we can see a massive demographic dividend approaching in several countries. The country most likely to be affected, and in fact already experiencing a dramatic boom, is India.

Today, at least in India, attitudes are changing. A very young population is currently coming of age and entering the workforce. Corporate leaders will have to respond to the demographic dividend by changing or expanding their strategies involving human capital, both for customers and for employees. One of the best places to look at these emerging strategies is India — in part because of its immense population and size, but also because of its political and economic structure.

Today’s boom generation is bringing forth new ideas in marketing, distribution, and networking. For example, banks in India are linking up with self-help groups and post offices to reach the vast numbers of rural people who lack bank accounts and financial access. In urban areas, some banks are abandoning traditional bricks-and-mortar infrastructure and are instead leveraging information technology and communication tools to serve their consumers. Retailers are using unconventional means to tap into the rural consumer class and bypass infrastructure constraints. They are letting people pay with grain for consumer goods. They are setting up sales and distribution networks staffed by the villagers they hope to target. Companies such as the Solar Electric Light Company (SELCO) are meeting the needs of unelectrified communities in the states of Tamil Nadu and Karnataka through solar lighting.
One major reason that global businesses are paying attention to India is this creativity and innovation now bubbling to the surface. It might appear at first glance that India has attracted the attention of these businesses purely as a consumer market, just as purchasing power in Europe and the U.S. is hitting a plateau. But India’s domestic economy includes more than passive consumers; valuable technological and business strategies are emerging there that have promise for the rest of the world. The young in India are providing its markets with both the talent to build and sell products, and the consumers to buy them. This self-reinforcing circle is turning India’s economy into a force to be reckoned with, just as it has in other countries where the demographic dividend has paid off.
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