Danielle Rajendram is an intern with the international security program at the Lowy Institute.

As Australia and many other nations face a greying demographic profile, the youth segment of India's population is increasing rapidly and is projected to do so for the next 30 years. As a result, India's workforce is set to grow dramatically, with one million people entering the labour market every month.

Provided India acts quickly, this demographic dividend could introduce new dynamism into its economy. Failure will instead spell demographic disaster.

India's ability to reap the rewards of this huge demographic advantage is far from guaranteed. The key to transforming the demographic dividend into economic growth lies not only in having more people, but having greater numbers of better trained, healthier and more productive people. As noted by India's Minister of Human Resource Development, 'it will be a dividend if we empower our young. It will be a disaster if we fail to put in place a policy and framework where they can be empowered'.

India still has a long way to go, as this UNICEF summary portrays. Its literacy rate sits at around 63%, and while 83% of children attend primary school, India's tertiary education rate is far lower at only 13%. By comparison, China's tertiary education rate stands at 23%, and the US at 63%. While female literacy rates are on the rise and significantly outpacing growth in male literacy, there is still a considerable deficit, with 65% of women and 82% of men literate in 2011.

Statistics aside, the quality of India's higher education system is lacking in global competitiveness, with only one Indian university rating among Asia's best, according to the 2011-2012 Times Higher Education Ranking.

India's 2009 Right of Children to Free and Compulsory Education Act is a big step towards guaranteeing a basic education for every child, despite concerns over its implementation. However, education alone will not be enough – India needs to create employment for its swiftly growing labour force. It has been estimated that in order to accommodate the 100 million workers that will join India's workforce between 2015 and 2050, roughly 250 million jobs must be created to achieve full employment.

At a more basic level, India must work at improving the overall health and wellbeing of its children in order to make the most of their immense potential. Rajat M Nag of the Asian Development Bank estimates that 37% of India's population lives below the poverty line, and India is home to one-third of the world's poor. At 69 deaths per 1000 live births, India's under-five mortality rate is high, and 47% of children under five are malnourished. 

The World Bank notes a direct link between undernourishment and impaired cognitive development, and this may have dire implications for India's future productivity and development. With a Human Development Indicators ranking of 134 out of 187 countries, India must focus on developing the potential of its enormous human capital, which will in turn translate into favourable economic outcomes.

India's demographic dividend is expected to level off through 2040, so in order to capitalise on its favourable demography India must act now. In particular, India must quickly and massively invest in its public education system, with a focus on improving the skills of its burgeoning population through vocational education. India's plan to raise its higher education participation rate to 15% by 2015 is still far below what is necessary, and concerted and long-term planning is required to ensure that India transforms its growing workforce into an inclusive and sustainable economic advantage.

All of this presents major opportunities for a nation like Australia. Provided Canberra can fix the policy and perception problems surrounding the 2009-2010 crises about the treatment of Indian students, Australia has every prospect of becoming a serious partner in helping India realise the benefits of its youthful population.

Photo by Flickr user mckaysavage.