India’s family planning programs restrained population increase for decades due to limited resources.
After liberalization in the 1990s, India’s authorities altered course, arguing that the country’s large, young labor pool constituted a “demographic dividend” that would benefit the economy.
That promise will be challenged like never before. The UN expects India to surpass China as the world’s most populous nation in April, with over 1.4 billion people.
India has the largest working-age population (1.1 billion) and proportion (75%) of any major economy, despite a slowing birth rate.
China’s population will decline in 2022 for the first time in 60 years as it ages. Its economy, which had grown over 10% a year since 1978, is now stagnant. Beijing expects the country’s GDP to grow just 5% this year, after growing just 3% in 2022.
COVID-19 and escalating geopolitical tensions with the West have also encouraged industries and investors to seek locations other than the world’s second-largest economy for their supply chains and plants.
So may India capitalize on China’s economic woes with its population and labor force? Can the world’s largest democracy’s Achilles heel derail their dreams? Al Jazeera interviewed top economists and analysts.
India’s youth bulge is a double-edged sword. India must develop enough jobs for its millions of new workers to benefit from them. India needs global investments for that. India must act soon or risk losing its demographic dividend to unemployment.
Big population—benefit or detriment?
In 1952, India, with a population of 350 million, launched the world’s first national family planning program. The goal was to encourage two-child households.
By the 1960s, the Indian government under former Prime Minister Indira Gandhi began pursuing more aggressive—even repressive—measures to restrict population rates, which were close to six children per woman compared to two now. From the 1950s to the 1990s, economic growth averaged 4%. Mahesh Vyas, CEO of the Mumbai-based Centre for Monitoring Indian Economy (CMIE), said a growing population was a challenge.
“The alarming rate of population growth is the greatest obstacle in the path of overall economic development,” declared India’s health and family planning minister S Chandrasekhar in 1967. The West supported Indian democracy as a counterweight to Chinese communism. The World Bank loaned India $66 million for sterilisation programs, and the US tied food aid to India’s population control achievements.
India forced sterilisation on millions of males in the 1970s, killing hundreds from botched surgery.
India began privatizing its economy in the 1980s and 1990s. The country’s growth rate rose to 5.5 percent in the 1990s and 7 percent in the late 2000s.
The demographic dividend—when a majority of a country’s population is between 15 and 64 years old—became an economic driver for policymakers.
That dividend has boosted India’s economy since the 1990s. Vyas told Al Jazeera that India moved farmers to factories well in the 1990s. “Policy interventions and demographic changes led to this cultural change.”
Vyas said a large, young population that earns and saves might become a source of investments in the future.
“Many studies, both in the past and more recently, have shown that the demographic dividend has led to economic growth in many other parts of the world,” he said.
“Indians have this benefit.”
To earn and save well, that young workforce needs enough good-paying jobs in the contemporary economy. India is struggling with that.
Other data says India has a significantly higher unemployment rate. Urban India, with higher-paying non-farm jobs, had an 8.5 percent unemployment rate in March.
India adds five million workers annually. The government’s production-linked incentive scheme for selected sectors is scheduled to produce six million jobs in five years, which won’t meet India’s rising labor market.
Himanshu, a one-named associate economics professor at New Delhi’s Jawaharlal Nehru University (JNU), stated, “Unemployment has been one of the biggest challenges for the Indian economy in the past two decades, and it’s not showing signs of improvement.”
Investment growth in India fell from 10.5 percent between 2000 and 2010 to 5.7 percent between 2011 and 2021. The research cited concerns about power supply, road and rail networks, and business bureaucracy for this investment growth drop.
This is a rebuke of Prime Minister Narendra Modi’s “Make in India” programs, which aim to make India a manufacturing hub and an investment magnet.
Himanshu told Al Jazeera that India’s capacity to hire young people hasn’t been satisfactory.
COVID- 19 lockdowns forced 40 million rural Indian laborers in cities to return home, causing a massive internal migration flow. This, combined with a lackluster jobs market recovery following the pandemic, has increased India’s agriculture job share while decreasing its manufacturing sector share.
The transition from cities to villages reverses India’s successful strategy from the 1990s, when Vyas said the “demographic dividend coupled with more liberal and intensive efforts to drive investments helped” boost the economy. Since approximately 45% of the country’s workforce works in a sector that accounts for 20% of its economy, it suggests hidden unemployment.
Himanshu remarked, “More people are actually joining the agricultural sector compared to the non-agricultural sector, which really shows that we are going to fritter away the demographic dividend.”
China-plus-one competition
Everyone isn’t pessimistic. Radhicka Kapoor, a visiting professor at the Indian Council for Research on International Economic Relations in New Delhi, said India is well-positioned to benefit from corporations spreading beyond China.
China’s population over 60 will rise from 20% to 30% by 2035 due to rapid aging. Vietnam, an industrial hub, is rapidly aging. India’s 15-64 age group is slightly higher than the Philippines’, another potential competitor for China’s manufacturing market.
Kapoor told Al Jazeera that India’s high working-age population makes it attractive both as a labor market and a market for goods and services.
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