Population Dynamics in India

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PROGRAM ON THE GLOBAL DEMOGRAPHY OF AGING

Working Paper Series

Population Dynamics in India and Implications for Economic Growth David E. Bloom

January 2011

PGDA Working Paper No. 65 http://www.hsph.harvard.edu/pgda/working.htm

The views expressed in this paper are those of the author(s) and not necessarily those of the Harvard Initiative for Global Health. The Program on the Global Demography of Aging receives funding from the National Institute on Aging, Grant No. 1 P30 AG024409-06.

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Population Dynamics in India and Implications for Economic Growth1 David E. Bloom Harvard School of Public Health January 2011 Keywords: Age structure China-India comparison Conditional convergence Demographic dividend Demographic transition Economic growth Economic growth in India Policy reform Population health Population of India

Abstract Demographic change in India is opening up new economic opportunities. As in many countries, declining infant and child mortality helped to spark lower fertility, effectively resulting in a temporary baby boom. As this cohort moves into working ages, India finds itself with a potentially higher share of workers as compared with dependents. If working-age people can be productively employed, India’s economic growth stands to accelerate. Theoretical and empirical literature on the effect of demographics on labor supply, savings, and economic growth underpins this effort to understand and forecast economic growth in India. Policy choices can potentiate India’s realization of economic benefits stemming from demographic change. Failure to take advantage of the opportunities inherent in demographic change can lead to economic stagnation.

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This chapter has been prepared for The Handbook of the Indian Economy (Chetan Ghate, Ed., Oxford University Press, forthcoming 2011). An earlier version of this chapter was presented at the March 2010 India Today Conclave in New Delhi. The author is indebted to Larry Rosenberg and Marija Ozolins for valuable assistance in the preparation of this chapter, and to David Canning, Chetan Ghate, and Ajay Mahal for helpful discussions and comments. Support for this work was provided by a grant from the William and Flora Hewlett Foundation and by the Program on the Global Demography of Aging at Harvard University, funded by Award Number P30AG024409 from the National Institute on Aging. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institute on Aging or the National Institutes of Health.

2 Introduction The world experienced dramatic population growth during the twentieth century, with the number of inhabitants doubling from 3 to 6 billion between 1960 and 2000. India, too, saw very rapid population growth during this period – from 448 million to 1.04 billion – and to 1.21 billion in 2010. The effects of past and projected future demographic change on economic growth in India is the main focus of this chapter. Figure 1 plots world population from 1950 to 2050, and shows the share of world population attributable to India; post-2010 data are United Nations (UN) projections. Figure 1 India’s share of world population 10 9 8

Population (billions)

7 6 5 4 3 2 1 0 1950

1975
India

2000
Rest of World

2025

2050

Source: United Nations (2009).

Global population grew at roughly 2% per annum from 1960-2000, a level that is unsustainable in the long term, as it translates into population doubling every 35 years. India’s population is currently growing at a rate of 1.4% per year, far surpassing China’s rate of 0.7%. The differential between India and China will result in India surpassing China with respect to population size in less than 20 years. While a cause for concern, global population growth has not met Malthus’ pessimistic predictions of human misery and mass mortality. During the past few decades, rapid population growth has been accompanied by an...
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