Kerala 2005 - of Planning Commission

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2. Congruences and Synergies
2.1 Demographic Dividend
As noted earlier, Kerala is now in the final stage of
demographic transition, with low fertility and mortality,
and its related age structural transition, with an almost
stable young age dependent population, increasing
working age population and older population. The
shift in the age structure produced by the demographic
transition has several social and economic implications.
First, the increase in the supply of labour force, both
in absolute and relative terms, can positively influence
economic growth. The huge bulge in the working age
population has greater potential to act as an engine of
economic growth, if they are absorbed in the labour
market. However, in the case of limited opportunity for
employment in the local economy, the large bulge in the
working age population may result in people migrating to
other cities within the country or to other countries where
employment opportunities are greater. Once people
emigrate, the modernisation and technology brought from
such destinations may facilitate innovation and adaptation
of technology in the local economy. Demographic
transition also reduces average duration of child-bearing
years. Once women complete childbearing, they will be
available for work, if given an opportunity. The increase
in female labour force participation will, in turn, increase
household income, which may influence investment in
the quality of children.
Second, fertility decline has immediate direct impact
on the size of the school-going population. This will
have implications both at the micro and macro level.
The cost of education and health will be reduced due
to a decline in the number of children per household.
Keeping the cost per child constant, fertility decline will
contribute towards better quality of children with respect
to education and health. Similar implications can also be
observed at the macro level. Several studies have reported
that among other factors, the demographic transition and
the changing age structure of the population has played
a favourable role for rapid per capita income growth,
particularly in East and South-East Asian countries.
(Bloom and Williamson, 1997; Mason, 2001). However,
the mechanisms through which demographic transition
has had an effect on economic growth seems to be
different in Kerala.
2.1.1 The Age-structural Transition
We start with a discussion of the changes in the age
structure of Kerala’s population from the 1960s. In order
to draw future implications for growth, the projected
age structure till 2021 is used (for details on projection
assumption, see Tharakan and Navaneetham, 2000).
The age structure of the population is classified
according to the lifecycle stages and its behaviour
in the general economy as 0-14 (young), 15-24
(youth), 25-44 (prime working), 45-59 (middle) and
60+ (old age). As the young population (0-14) are
dependent on the adults for their consumption, they
incur health and education expenditures. The youth
population (15-24) also consume health and education;
however, the pattern of consumption behaviour is
likely to be different from that of the young due to
differences in needs and services. The prime working
age population (25-44) save only a little. The population
in the middle age group 45-59 are likely to earn a higher
income because of their experience and also to have a
higher savings rate than the 25-44 age group. Old age
people (60+), on the contrary, depend on others for
meeting their consumption needs. Studies have shown
that age share of the variables have substantial effects
on per capita GDP growth rate (Lindh and Malmberg,
1999; Andersson, 2001; Navaneetham, 2004).
Figure 5.1 shows the age structural transition in
Kerala from 1961 to 2021. It is evident that the age
structure of the population did change significantly
between 1961 and 2001. The share of the young age
dependent population has consistently declined from
1961 onwards. The decline picked up momentum in
1971.Around 43 per cent of the total population were
in the age group of 0-14 in 1961 and this share declined
to 30 per cent in 1991 and is likely to reach 19 per cent
in 2021. The old age dependent population increased
from 5.8 per cent of the total population in 1961 to
8.8 per cent in 1991 and is likely to reach 17 per cent