Context:
- It was announced that India overtook China as the world’s most populous country. According to the estimates of the United Nations, in April 2023, India’s population reached 1,425,775,850 people.
- This is a dubious distinction for a country that, notwithstanding its genuine credentials of being the fastest-growing major economy in the world at present, still belongs to the lower-middle income category (per capita income is around $2,200; one-sixth of China’s and even lower than Bangladesh’s).
India’s population over the ages
- The earliest estimates date back to around 9,500 years ago. If the first modern people arrived in the subcontinent some time between 60,000 and 80,000 years ago, then following the end of the last glacial period around 9,500 to 7,000 years before the present, they probably numbered in the several hundred thousand.
- Around 4,000 years ago, most of the population (estimates vary between 4 to 6 million) was living in and around the Indus basin. This was perhaps the largest concentration of human beings anywhere in the world at the time.
- By the time the Mauryan Empire flourished, most of the population had shifted to the Ganges basin. Regardless of the exact population, “from this time forth the Ganges basin would always contain one of the world’s largest concentrations of people.”
- The next data estimate has been arrived at by using Hsuan Tsang’s observations.
- Data estimates continue to be quite uncertain for almost a thousand years and the next milestone, as it were, uses data from Ain-i-Akbari in 1595.
- Since 1871, however, data has become more and more precise, thanks to formal census and UN projections.
Does population growth help economic development or hinder it?
- Kofi Annan, former UN Secretary-General, once said: “The idea that population growth guarantees a better life financially or otherwise is a myth that only those who sell nappies, prams and the like have any right to believe.”
- Many may identify with Annan’s view while many others may disagree. In fact, the question ‘whether population growth is good or bad for economic development’ has flummoxed researchers over the decades.
- The starting point of this debate is Thomas Malthus’ argument in 1798 that population growth would depress living standards in the long run. Unaware of how technology would raise productivity on the one hand and improve health on the other, Malthus had suggested that the way to avoid mass starvation and disease in the wake of a population far exceeding resources was to exercise “moral restraint”.
- Since then, however, the world population has grown eight times to reach the 8 billion mark. Still, Malthus’ essential insight and apprehension was hugely influential among policymakers.
- During the 1950s and 60s, the general view of economists was that high birth rates and rapid population growth in poor countries would divert scarce capital away from savings and investment, thereby placing a drag on economic development. They hypothesized that larger families have fewer aggregate resources and fewer resources per child. Larger families, therefore, spread their resources more thinly to support more children. This leaves less for saving and investing in growth-enhancing activities. It also reduces spending on enhancing the economic potential of each child (e.g. through education and health expenditures).
- However, between the 1970s and 1990s, this pessimism abated as several studies “failed to detect a robust relationship between national population growth rates and per capita income growth”.
- The global view reverted in the 1990s when researchers again found a clear “negative association between population growth and economic performance”. The world was also introduced to the concept of “demographic dividend,” which essentially refers to a period in an economy’s trajectory when there is a bulge in the working-age population (roughly speaking, population between 15 and 65 years). This happens when fertility rates decline significantly over a period of time. With a lower proportion of children depending on the working population, there opens a window of opportunity during which such a country can potentially raise its level of savings and investment.
Which view is correct? What is the link?
- Fox and Dyson look at the data for population growth and GDP (and GDP per capita) growth between 1870 and 2014. But, crucially, they break it down into different segments to explain the trend
- The period between 1950 and 1973 is quite significant. It saw the fastest growth of population as well as GDP and GDP per capita. Fox and Dyson explain that essentially rapid economic growth was mitigating the potential negative impact of rapid population growth during this period.
- In considering these trends, two key observations must be made. First, accelerated population growth in the post-war boom years was stimulated largely by the diffusion of medical knowledge, technologies, and public health initiatives that dramatically reduced death rates from infectious and parasitic diseases. This coincided with a period of rapid economic growth. However, importantly, sustained improvements in mortality did not depend on sustained economic growth.
- Second, in a surging world economy (i.e. between 1950 and 1973) poorer countries benefitted from a positive investment environment and burgeoning employment opportunities…After 1973, mortality continued to decline in most countries despite stagnating output. This meant that, in the aggregate, there was less output produced (e.g. income) per person. Sluggish global growth also meant that the pie of investment and employment opportunities shrank, rendering larger families a greater economic liability at both the household and the macroeconomic level.
- In other words, the decline in mortality was not due to rapid economic growth; it just happened to accompany it. Further, the negative effects of population growth were masked until the economy was doing well. When growth faltered as seen since 1973 and more particularly after 2008 the underlying negative association between population growth rates and economic growth rates got exposed.
What does it mean for India?
- According to the UN’s projection, unlike China whose population has already peaked, India’s population will continue to rise until 2064
- But the crucial thing is that India’s fertility rate (the number of children per woman) is already below the replacement rate of 2.1. To be sure, the replacement rate is the rate of fertility at which the population stabilises (because it replicates itself). In case you are wondering why it is 2.1 and not 2, the additional 0.1 children per woman is to account for infant mortality.
- Given the fact that India is already the most populous country and still expected to see a rise in total population for the next 40 years despite being below the replacement rate of fertility, the main concern now is not family planning.
- To be sure, India must not allow the fertility rate to go up but the bigger challenge now is to figure out how to best use India’s demographic dividend — the bulge highlighted in green in the Chart 2below — to ensure that India becomes rich before it becomes old.
- Many experts argue that China, which has been experiencing the bulge in the working-age population (relative to the old and young population), might fail to become a rich country before it starts ageing.
- This is noteworthy for Indians and Indian policymakers because China has grown quite remarkably over the past four decades.
- Not every country has managed to escape what is often called the “middle-income trap”. For instance, while South Korea and Israel did transition to becoming a rich country, Argentina and South Africa have failed to transition.
- India, which is a lower-middle-income country (Argentina, South Africa and China are upper-middle-income countries), will not only have to grow remarkably fast but also do that on a sustained basis if it has to outgrow the negatives of a huge population.
Source: Indian Express