Q.What is dependency ratio? Explain how it is calculated and its economic significance.

Dependency ratio links a population's age structure directly to its economic burden or opportunity.

The dependency ratio is a measure of the economic burden that the non-working-age population places on the working-age population. It is calculated as:

The numerator combines young dependents (children not yet of working age) and old dependents (the elderly, largely retired from the workforce), while the denominator is the working-age population that is assumed to support both groups economically.

The economic significance of the dependency ratio lies in its link to savings, investment, and growth. When the dependency ratio is high, a large share of national income must be devoted to supporting dependents (education for children, healthcare and pensions for the elderly), leaving less for savings and investment. When the dependency ratio falls — as has happened in India in recent decades, because the share of children in the population has fallen faster than the share of elderly has risen — a larger share of the population is of working age relative to dependents, creating the potential for higher savings, investment, and growth. This favourable window is precisely what is meant by …

Dependency Ratio = [(Population 0–14 yrs + Population 60+ yrs) ÷ …

Forgetting to include BOTH young and old dependents in the numerator — students often calculate only child dependency or only old- …