Youth dependency ratio and total factor productivity: a study on Indian States

For the last two decades, India is at the centre stage of the world's demographic transition with the major share of youth dependent population moving towards the working age bracket. This paper tried to examine the effect of declining youth dependency ratio on the growth rate of output per worker. Second, via decomposition method, I tried to figure out the channel through which the major impetus to growth will come. Based on the empirical analysis considering 21 Indian states concluded that the decline in youth dependency ratio will increase the growth of output per worker and the major thrust will come from the total factor productivity growth. Study showed that reduction in youth dependency ratio by one percentage will increase total factor productivity with a range varied from 0.33 percent to 0.4 percent. Post financial crisis of 2007, all the major states have enjoyed growth rate of output per worker due to efficiency of factor inputs.