Population dynamics in India and implications for economic growth

India’s population is currently growing at a rate of 1.4% per year, far surpassing China’s rate of 0.7%. This differential will result in India's population size overtaking China's in less than 20 years. This author reviews the size, growth, and structure of India’s population in historic and comparative perspective. It focuses on  on features of India’s demography that have been, and will likely be, relevant to economic growth and the improvement of living standards.

The paper analyses UN data on population dynamics in India - fertility, mortality, migration, and age structure.  It reviews theoretical and empirical literature on the effect of demographics on labour supply, savings, and economic growth and explores the application of the models and results in this literature to understanding and forecasting economic growth in India. It then goes on to examine India’s economic prospects and discusss policy issues related to alternative demographic scenarios.

The author concludes that Indian policymakers will need to recognise that the realisation of the demographic dividend depends on an economy’s capacity to absorb workers into productive employment. This capacity would be strengthened by:

• good governance - effective citizen input, well-functioning institutions, respect for the rule of law, low level of corruption, respect for property rights, sanctity of contracts

• efficient infrastructure - reliable roads, railways, telecommunications, water supply, sanitation, and agricultural needs

• prudent fiscal and macroeconomic management - policies that keep inflation reasonable, promote inclusive economic growth, avoid severe trade imbalances

• well-developed and competitive financial markets  - institutions that facilitate mobilisation of savings, safeguards to ensure that banks and other financial institutions serve the public interest) and labour markets
  

• investments in education and training  - strength in all levels of schooling for females and males of all income levels and castes, job training for workers to keep up with new types of services and industries