The concept of a demographic dividend was introduced in the late 1990s to describe the interplay between changes in population age structure and rapid economic growth in East Asia. It refers to the accelerated economic growth triggered by a sharp decline in fertility and a resulting rise in the working-age population. This period, typically lasting 20 to 30 years during a country’s demographic transition, occurs when the proportion of working-age people increases relative to dependents. With fewer births each year, the working-age population grows faster than the young dependent population.

East Asia benefited from a virtuous cycle linking income growth and fertility decline, while South Asia remains caught in a low-level population–income trap.¹

The Four Dividends of Demographic Change

For analytical and policy purposes, demography can be viewed as generating four kinds of dividends. The first dividend arises when the working-age population grows faster than dependents, expanding the labour force. The second dividend comes from higher savings and investments as more people work and plan for the future. Extensions to the concept include the third dividend, domestic demand growth from rising GDP, and the fourth dividend, which is sustained development driven by effective policy and investment in human capital.²

Demographic Indicators in South Asia: A Comparison with High-Income Countries

Understanding South Asia’s demographic transition requires examining fertility rates, dependency ratios, and age structures. These indicators reveal both the opportunities and constraints the region faces in realizing its demographic potential. While fertility has declined and the share of working-age population is rising, contrasts with high-income economies show gaps in aging, dependency, and savings capacity.

Fertility Rate

Source: World Bank (2024). Fertility rate, total (births per woman).
South Asia’s fertility has largely converged around replacement level (≈2.0), with Maldives (1.6) and Bhutan (1.5) below replacement. Pakistan (3.6) and Afghanistan (4.8) remain outliers.
Key takeaway: Most South Asian countries are nearing demographic maturity, but uneven fertility decline—especially in Afghanistan and Pakistan—delays full entry into the dividend window.

Dependency Ratio

Source: World Bank (2024). Age dependency ratio (% of working-age population).
Dependency ratios vary widely: Afghanistan is high (83%), while Maldives (32%) and Bhutan (38%) are low. South Asia overall (47%) is lower than high-income countries (55%).
Key takeaway: South Asia’s dependency balance is relatively favourable, though variation within the region highlights uneven readiness to reap the dividend.

Elderly Population (65+)

Source: World Bank (2024).
South Asia’s elderly population is 7%, compared with 20% in high-income countries. Sri Lanka (12%) has the most advanced aging profile, while Afghanistan (2%) and Pakistan (4%) remain young.
Key takeaway: Most South Asian economies still face limited aging pressure, but Sri Lanka will need to prepare early for age-related policy challenges.

Working-Age Population (15–64)

South Asia’s working-age share (68%) exceeds that of high-income countries (65%), with Maldives (76%) and Bhutan (73%) leading.
Key takeaway: The region holds a demographic advantage, though Afghanistan and Pakistan lag behind due to slower fertility transition.

Young Population (0–14)

South Asia’s youth share (25%) remains high compared to high-income economies (16%). Afghanistan (43%) and Pakistan (37%) remain youthful, while Bhutan (21%), Sri Lanka (22%), and Maldives (20%) are closer to global norms.
Key takeaway: Persistently high youth shares in some countries mean the demographic transition is incomplete, potentially delaying regional benefits.

Overall Takeaway

South Asia is in the midst of its demographic window, marked by falling fertility and a growing working-age base. The region’s dependency ratio is favourable, and aging pressures are modest. Yet, the transition remains uneven: Afghanistan and Pakistan are weighed down by high fertility and youth dependency, while Maldives, Bhutan, and Sri Lanka have advanced further. To harness this potential, countries must pair demographic gains with job creation, skills development, and human capital investment—otherwise, the dividend may remain unrealized.

Broad Demographic Trends (2019–2024)

• Fertility: Falling in most countries; Bhutan already below replacement.

• Age Dependency: Declining but uneven; Sri Lanka diverges slightly.

• Aging: Rising across South Asia, though less severe than in rich economies.

• Youth Share: Declining slowly; all South Asian countries still have larger youth populations.

• Working-Age Share: Rising in most South Asian countries, unlike high-income countries.

• Labour Force Participation (Men): Rising in Bangladesh, Bhutan, Pakistan, and Maldives.

• Labour Force Participation (Women): Increasing across most of South Asia, except Afghanistan and Sri Lanka.

• Youth Employment Ratio: Declining in Afghanistan, Maldives, Nepal, and Sri Lanka—an area of concern.

Challenges in Harnessing the Dividend

1. Educational Mismatches

The flow of educated youth increasingly exceeds the supply of high-skill jobs. Globally, 48% of young people were in school or training in 2023 (up from 38% in 2000), but mismatches persist between education systems and labour market demands.³

2. Youth Not in Education, Employment, or Training (NEET)

The NEET share in South Asia declined from 31.5% (2019) to 23.5% (2024) but remains significant, reflecting gaps in employable skills.

3. Emerging Job Roles

Growth is concentrated in technology-intensive and skill-demanding sectors, leaving low-skill youth behind.⁴

Demographic Imperatives and the Future of Work

Two shifts are reshaping global labour markets: aging in high-income economies and expanding working-age cohorts in developing regions. These trends will intensify demand for skills in healthcare, education, and technology.

Sectors with the fastest growth:

• Frontline roles: farmworkers, drivers, construction workers, salespersons, and food processing staff

• Care economy: nurses, counsellors, teachers, and personal care aides

• Technology: AI, big data, fintech, and software specialists

• Green economy: renewable energy engineers, EV specialists, environmental engineers

Sectors in decline: clerical, postal, and secretarial jobs, including data entry and cashiers.

By 2030, 59% of the global workforce will require reskilling. Of these, 29 could be upskilled in current roles, 19 redeployed, and 11 left vulnerable without support.⁵ Global net job growth is projected at 78 million, equivalent to 7% of total employment.⁶

Global Skill Partnerships: A Way Forward

High-income countries face acute labour shortages due to aging, while many lower-income countries—including those in South Asia—have abundant youth but inadequate skills. Global Skill Partnerships (GSPs) allow both origin and destination countries to co-invest in training that meets shared needs.⁷

Such partnerships can help South Asia address its employability challenge and support global demand for skilled workers. Yet, this will require stronger revenue mobilization to sustain investments in education, health, and skill formation. Given fiscal constraints, GSPs could attract external funding and technical collaboration to expand training capacity.

Demographic data show South Asia’s working-age population rose from 66.7% (2019) to 67.9% (2024), while the share in high-income countries fell from 65.6% to 64.7%. South Asia’s vast diaspora can further strengthen the region by leveraging knowledge networks, remittances, and investment flows.⁸

References

[i] https://documents1.worldbank.org/curated/en/781891550815372274/pdf/Demographic-Dividend-Operational-Tool-for-Pre-Dividend-Countries.pdf

David E. Bloom, David Canning, and Pia N. Malaney Demographic Change and Economic Growth in Asia Working Papers Center for International Development at Harvard University , Working Paper No. 15 May 1999 https://www.hks.harvard.edu/sites/default/files/centers/cid/files/publications/faculty-working-papers/015.pdf

[ii]S. Amer Ahmed Marcio Cruz Bryce Quillin Philip Schellekens ,Demographic Change and Development A Global Typology, Policy Research Working Paper 7893https://documents1.worldbank.org/curated/en/867951479745020851/pdf/WPS7893.pdf

[iii] Ibid,:xviii

[iv] Ibid :38-40

[v] Future of Jobs Report 2025:5 6 World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland , https://www.weforum.org/reports/the-future-ofjobs-report-2025/

[vi] Ibid:18

[vii] “Acosta, Pablo; Özden, Çağlar; Lebow, Jeremy; Rodriguez, Limon; Dahlgren, Evelina. 2025. Global Skill Partnerships for Migration: Preparing Tomorrow’s Workers for Home and Abroad. © World Bank. http://hdl.handle.net/10986/42780 License: CC BY-NC 3.0 IGO.”

[viii] World Bank. 2025. South Asia Development Update, April 2025: Taxing Times. © World Bank, Washington, DC. http://hdl.handle.net/10986/42891 License: CC BY 3.0 IGO.

(The writer is a retired Special Secretary, Government of India. Views expressed are personal. He can be reached at ppmitra56@gmail.com)