The notion that the demographic dividend will power the next phase of India's growth as the country seeks to replace China as the global manufacturing hub is deeply engrained in public discourse. But a new report by Ambit Capital challenges the very basis of this idea.

The report titled 'Sizing India's demographic bomb' argues that contrary to the popular belief, "a demographic dividend is very unlikely to accrue to India anytime soon." This, it contends, is largely because "a large share of India's youth today lacks education as well as jobs to deliver this productivity." The problem is more acute in the northern region of the country.

The Northern region which is home to 45 per cent of the country's population, spans the states of Jammu and Kashmir, Himachal Pradesh, Haryana, Punjab, Delhi, Uttarakhand, Uttar Pradesh, Rajasthan, Bihar, and Madhya Pradesh. It accounts for roughly 36 per cent of the youth population, those between the ages of 15 to 35 years.

But despite being the youngest region in the country, researchers at Ambit capital fear that the region "runs the risk of exploding as millions of barely literate men face a lifetime without jobs and without women." A toxic combination of factors namely - an already skewed and deteriorating gender ratio, higher levels of illiteracy, unemployment and low growth of agriculture which is the biggest employer in the region - is likely to aggravate an already precarious situation. The report warns that the situation could worsen with violence and social unrest related risks coming to the fore particularly in the run-up to elections in the states of Uttar Pradesh and Punjab.

Other regions of the country are unlikely to face a similar problem as on most socio-economic indicators, the southern and western states of the country fare better than the northern states. In fact, the southern states are similar on various socio-economic parameters to middle income countries. Not only are people residing in these states more affluent than those living in northern India, but they are more educated and have better health indicators. Higher levels of literacy imply that even labour markets in the southern and western regions are "in better shape" as compared to northern states which "suffer from an over-supply of under-skilled labour."



But the report does not factor in migration. If the situation in the northern states does indeed deteriorate it could prompt mass migration to more developed regions in search of jobs. This could put pressure on labour markets in the southern and western regions of the country.