New Delhi: India’s booming population is set to coming to a grinding halt over the next two decades, as the country witnesses a sharp slowdown in population growth, the Economic Survey 2018-2019 revealed on Thursday.
“Demographic projections show that India’s population growth will continue to slow rapidly over the next two decades, growing less than 1% during 2021-31 and under 0.5% during 2031-41," the Economic Survey noted on 4 July.
Such population growth rates would be close to the trend currently seen in more mature economies of Germany and France, the Survey noted.
India is the world’s second most populous country, after China. It is home to over 1.3 billion people (The World Bank 2018 estimates). However, India is also a very young country—half of its population is under the age of 25.
That’s an incentive for large consumer goods makers, which have been looking to leverage India’s young demographic as the key to consumption.
From IKEA to Apple, the world's largest retailers and technology companies have been investing in growth markets of China and India owing to their large population base.
But India's demographic dividend could soon shift, with a young population giving way to an ageing one in what could be a cause of concern for how companies plan their offerings around such a consumer base.
The Economic Survey 2019 noted that while the country as a whole will enjoy the “demographic dividend" phase, some states will start transitioning to an ageing society by the 2030s.
The southern states, Himachal Pradesh, Punjab, West Bengal and Maharashtra are already quite advanced in the demographic transition, and witnessing an ageing phenomenon.
As India’s economy has progressed making way for better access to healthcare, increased information and awareness around fertility, the country has witnessed a sharp decline in total fertility rate (TFR) since the mid-1980s. Since 1984, the TFR has halved from 4.5 to 2.3 as of 2016.
This has an impact on how the country’s demographic dividend shapes up going forward.
The Survey noted that India’s population aged 0-19 has already peaked due to sharp declines in total fertility rates (TFR) across the country. By 2041, this population age group is set to drop from as high as 41% in 2011 to 25%.
India’s demographic dividend will peak around 2041, when the population share of working-age (20-59 years) is expected to hit 59%, the Survey said.
Moreover, India's working-age population will grow by roughly 9.7 million per year during 2021-31 and then drop to 4.2 million per year in 2031-41.
“Depending on the trajectory of labour force participation during 2021-41, additional jobs will need to be created to keep pace with the projected annual increase in working-age," the Survey noted.
Interestingly, on the other hand, the share of elderly in India ie those aged 60 years and above, will continue to rise steadily to nearly double from 8.6% in 2011 to 16% by 2041.
“At the other end of the age scale, policy makers need to prepare for ageing," the Economic Survey said eroding India’ young demographic myth going forward. “This will need investments in health care as well as a plan for increasing the retirement age in a phased manner."
The Survey also added that going forward the proportion of elementary school-going children, i.e. those aged 5-14 age, will see a significant decline. As a result, the Survey added that "many states need to pay greater attention to consolidating or merging schools to make them viable rather than building new ones".
For the next two decades, a country like India will continue to benefit from the growing young population that is also part of the workforce, as well as, an early ageing population with higher disposable income and more affluence," said Rajat Wahi, partner, Deloitte Consulting, adding that this will help drive consumption. However, it will become more challenging in three or four decades from now, as the percentage of aged population grows, said Wahi. He says that we will witness the same challenges like increasing healthcare costs, caring for elderly, etc related to ageing being faced by the mature economies today. It will also push companies to address this consumer segment and develop more products and services aimed at the ageing population.