India needs to grow 8% for 3 decades to provide jobs for the world’s largest population, economists say

India's population has China’s 1.425 billion people, according to the UN’s World Population dashboard, and is expected to touch 1.668 billion by 2050. China’s population is expected to contract to about 1.317 billion.

With India surpassing China to become the world’s most populous country with 1.428 billion people, it needs to grow an annual pace of 8 percent for the next three decades to ensure jobs for people of working age, economists say.

The country also needs to invest heavily in skilling its workforce to become a global repository of human resources, they say.

India's population has China’s 1.425 billion people, according to the UN’s World Population dashboard, and is expected to touch 1.668 billion by 2050. China’s population is expected to contract to about 1.317 billion.

The United Nations Population Fund’s State of the World Population Report 2023 estimates India’s mid-year population at 1.428 billion and China’s at 1.427 billion.

“India surpassing China in population is only an event. What is more important are the challenges and opportunities it will bring,” said NR Bhanumurthy, vice-chancellor of the Bengaluru-based Dr BR Ambedkar School of Economics, told Moneycontrol.

“Challenges are going to be much more in terms of providing employment to the working age population. We need to grow at 8-9 percent for a long time, i.e. 2-3 decades, to provide employment and social security measures. Compared to other countries, India has grown at an average of 7 percent in this decade,” he said.

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Half the population aged under 30

India has 254 million people in the 15-24 age group, the world’s largest young population. This year, 25 percent of India's population will be in the 0-14 year bracket, 18 percent between 10-19 years of age and 26 percent between 10-24 years old. Sixty-eight of India’s population is in the 15-64 age group, and only 7 percent above 65. That means half the population is under the age of 30 in India.

“GDP is linked to productivity and skill enhancement for which structural reforms are needed. China has done the same to focus on growth by enhancing skill sets. We are already in the direction to focus on skillsets. If reforms in land, labour market can be addressed, productivity will go up,” Bhanumurthy said.

“Unemployment is a dynamic concept and is a problem everywhere, not only in India. Way to address it is to enhance economic activity and GDP, which will create jobs. We need to shift focus of economic activity from service-led to manufacturing as it is labour-intensive. Share of manufacturing needs to increase from 16 percent to 25 percent of GDP, then we can absorb a lot of people. China’s 10 percent growth was heavily dependent on manufacturing. Because India's service sector share is more, we are having skewed growth,” Bhanumurthy said.

Instead of adopting an alarmist view towards population it is important to understand the progress made in containing the explosion by managing fertility. India’s growth rate (in fertility) has declined to 1.5 percent per annum, he said.

Demographic dividend

“What is needed is adequate investments in education and market-ready skill building. Government needs to focus on technology and digital skill sets. It’s about a targeted approach towards creating the right combination of opportunities and skill sets and investing in the demographic. Growth rate of the population has steadily declined. To progress economically, investment in the younger population is a must so that they can contribute productively to the workforce. Investment in human resources leads to economic development and progress. China invested in health, education, investment in the young demographic dividend that has led to it becoming a superpower,” Sanghamitra Singh, Lead - Policy and Programs, NGO Population Foundation of India, told Moneycontrol.

As the population of most developed countries declines, India can provide the skills to other countries. India can be the repository of human resources.

“We need to celebrate the substantive decline in infant and maternal mortality. We have managed to bring fertility levels to replacement levels. We need to make a strategy specific to inter-regional disparity as there are pockets where fertility rates are high. Going forward, employment may be a challenge, but first we have to address the huge mismatch, as there are jobs but not enough market-ready population. So many positions are vacant in rural hospitals and clinics. First opportunities need to be capitalised on,” Singh said.

The total fertility rate of India is 2.0 and life expectancy at birth is 71 for males and 74 for girls. This population phenomenon needs to be looked at in the backdrop of population control policies, demographic transition and growth of the economy in India and China over the years.

“India, now with a high working-age population, can reap benefits of demographic dividend, conditional upon high state capital expenditure on health, education and employment programs. With artificial intelligence and other technological advancements, the government should also focus on skill-based job-creating areas. So, job replacement can be turned into job displacement,” A Sri Hari Naidu, economist at the National Institute of Public Finance and Policy, said.

Also Read | India's population growth slows down, despite surpassing China

Transition phase

As far as India goes, if the annual rate of population increase remains constant as of 2023, it would take 75 years for the total population to double.

“Did India cross China or is it because China's population growth declined over the years but India’s population growth is declining slowly? After a level of industrialisation, India directly transitioned to the service sector. India’s death rate and birth rates have gradually fallen over this transition,” Naidu said.

Just eight countries will account for half the projected growth in global population by 2050 — the Democratic Republic of the Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines and the United Republic of Tanzania; two thirds of people now live in a country where lifetime fertility corresponds to zero growth, according to The United Nations Population Fund’s State of the World Population Report 2023.

China moved very quickly from a traditional to an industrial economy. Contrary to the demographic theory, both death rates and birth rates have fallen in China. Recognising the working population decline and high dependency ratios, China relaxed its one-child policy. This is to maintain high economic growth and high consumption.

Next factory to the world?

India established the first national programme to control population growth through family planning in 1952. This achieved limited success in slowing birth rates.

“India becoming the world’s most populous country creates a huge demographic dividend. Most of the developed world is dealing with an ageing population. Meanwhile, India, with one of the youngest workforces, equipped with smartphones and perpetually connected with high speed data, can fill the gap. With demographic dividend on its side, India can easily become the factory to the world. This offers a window of reform to create a convergence of land, labour, capital and entrepreneurship to create jobs at scale,” Rishi Agrawal, co-founder and CEO of digital compliance company Teamlease Regtech, told Moneycontrol.

“The window of opportunity is small and bold reforms are the need of the hour. India needs to reimagine its complex, archaic regulatory framework to unleash the instincts of Indian entrepreneurs,” he said.