Population Dynamics IN India AND Implications FOR Economic Growth PDF

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POPULATION DYNAMICS IN INDIA AND IMPLICATIONS FOR ECONOMIC GROWTH – DAVID E. BLOOMBroadly, this article looks at the consequences of India's demographic transition—higher population growth and transforming age structure—and its impact on growth. In a comparison group comprising selected East Asian e...

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POPULATION DYNAMICS IN INDIA AND IMPLICATIONS FOR ECONOMIC GROWTH – DAVID E. BLOOM

Broadly, this article looks at the consequences of India's demographic transition—higher population growth and transforming age structure—and its impact on growth. In a comparison group comprising selected East Asian economies, approximately 2% of their growth in income per capita (over 1975–2005) ,roughly one-third of the supposed miracle, can be attributed to demographic change. Counterfactual experiments based on low and medium fertility rates for India imply a sizeable demographic dividend—roughly to the order of an additional percentage point or more annually to per capita income growth. The key policy question is whether health and education allocations at all levels by the government will grow in tandem to transform India's youth advantage into productive employment.  Section 1 of the article talks about the two significant breakthroughs regarding the impact of demographics on national economic performance; first one being the effect of the changing age structure - baby booms and busts and their echo effects - of a population and the second relates to population health. Age Structure – Demographic transition, nearly ubiquitous change countries undergo from a regime of high fertility and high mortality to one of low fertility and low mortality, leads to population growth as death rates decline first and birth rates fall later and age structure is also transformed due to the baby boom caused by sharply reduced rates of infant and child mortality. Main reasons of baby boom are increased access to vaccines, antibiotics, safe water, sanitation, and with couples realizing that fewer births are needed to reach their targets of surviving children. Baby booms affect economies majorly as more children means more resources needed to raise them which come at the cost of establishing infrastructure and investment in research and development. This can temporarily slow the process of economic growth. These children when reach their working age after 15-25 years cause the productive capacity of the economy to expand and attainment of a demographic dividend possible. Demographic dividend comprise of five distinct forces : First being the swelling of labour force as the baby boomers reach working age. Second being the ability to divert resources from investing in children to investing in physical capital, job training, and technological progress. Third being rise in women’s workforce activity that naturally accompanies a decline in fertility. Fourth being the fact that working ages are the prime years for savings (key to accumulation of physical and human capital and technological innovation.) Fifth being the further boost to savings that occurs as the incentive to save for longer periods of retirement increases with greater longevity. East Asian miracle – never before had such a large group of countries experienced such rapid growth in average incomes for such a long period of time as did the East Asian countries. Some of the causes revealed are the ratio of working-age (15-64 years) to the non-working age (below 15 and above 65) population was pretty high with large numbers of people in the prime years for working and saving i.e. less youth dependency. These countries experienced the most rapid demographic transition in history. Demography however is not destiny. It may lead to a boost in economic growth but it is only appropriate policies that are needed to make it happen. Without appropriate policies, countries might find themselves with large number of unemployed or underemployed working-age individuals i.e. a demographic disaster. Population Health – Health and longevity are very consequential for economic performance for four main reasons: First is that a healthier workforce is a more productive workforce. Second is that healthier children tend to have better records of school attendance and stay in school longer resulting in a more educated workforce. Healthy children have better cognitive function, and avoid physical and mental disabilities that may be associated with childhood illness. Third is that healthy populations have higher saving rates as people save more in anticipation of longer lives post-retirement. Fourth is that healthy populations attract foreign direct investment. Certain findings suggest that healthier countries experience faster growth in average income, and that a 10-year gain in life expectancy translates into as much as 1 additional percentage point of annual growth of income per capita. Researchers have talked about the central importance of health in the alleviation of poverty, the main asset that poor people possess is their labour and the value of that asset is crucially determined by their health. Talking about India’s ( as a whole) demographic profile over time, there has been significant improvements in basic health indicators. India has experienced a 70% decline in infant mortality rate since 1950 and a drop of 63 deaths per thousand in child ( under age of 5) mortality rate since early 1980s. Life Expectancy has increased at an average pace of 4.5 years per decade since 1950. Fertility rate has declined from 6 to 2.7 children per woman since 1950s. Population growth has fallen to 1.4% in 2010 after peaking at about 2.3% per year in 1970s. Finally, the decline of crude birth and death rates shows that India is well along in its demographic transition. India has one of the highest sex ratios, main reasons being sex-selective abortions, in the world at 1.12 males for each female. India differs from the world and developing countries as a whole in the manner in which sex differences in life expectancy have evolved since 1950. In 1950 in most countries women lived longer but not in India. However, this differential has reversed in intervening years. There have been manifestations in the age structure of India. In 1950, India had a pyramidal shaped age distribution as it had many children and few elderly. Over time, the base has shrunk as the number of working-age individuals increases relative to children and the elderly. India’s demographic cycle lags roughly 25 years behind that of East Asia. The medium- and low- fertility scenarios bode well with

respect to India’s potential for realizing a sizable demographic dividend. Another important demographic fact is that an estimated 11.4 million Indians are residing outside of India. In 2010, they sent remittances that constituted about 4.5% of GDP. As political, economic, and social conditions are changing over time in India and its neighbours, the number of migrants, the skills they take to other countries, and the value of the remittances they send have been changing significantly.  Section 2 of the article presents a comparison between India and China. India had 66% higher income per capita than China in 1980, but by early 1990s China overtook India and in 2008, the situation reversed, with income per capita in China being double that of India. This crossover can be explained through very different demographic trajectories experienced by the two countries – dissimilarities in Total Fertility rate (TFR) and the ratio of the working-age to the non-working-age population between the two countries. India and China are credited with establishing the world’s earliest national family planning programs. China’s campaign of “later, longer, fewer” and its one-child policy led to a sharp decline in fertility and a sharp rise in the working-age share of population. On the other hand, it led to political backlash in India that ultimately pushed back its family planning efforts and led to diverging of India and China’s economic trajectories. This difference may begin to narrow as India’s working-age share continues to rise, positioning India to recoup some of the income per capita ground it lost relative to China in the past two decades. Comparing the demographic conditions and their implications in China and India, short run China holds more of the prerequisites needed to take full advantage of its demographic dividend. Some of them being more flexible labour markets, high rates of female labour force participation, less illiteracy in general, better infrastructure, etc. However, China’s sustained economic growth might be curtailed due to its rapidly aging population which will create new demands and strains, resulting in wealth transfers from working people to elderly. In this respect, India has an upper hand over China. However, to utilize this advantage India needs to productively employ its working-age population for which it needs appropriate policies. Researchers have found out that India has grown at a rate comparable to the industrializing economies of East Asia, with growth strongest in various service producing industries, while India’s manufacturing sector remains weak. Overall, India’s demographic evolution will provide a potential boost to its rate of economic growth in coming decades and China will be losing its impetus that has helped spur the economy. But this requires policy changes in the areas of governance, macroeconomic management, trade, and human capital formation.  Section 3 talks about the three demographic- and health- related potential threats to India’s future prosperity – population aging, population heterogeneity, and the effects of urbanization on health. Population aging – The main force driving India’s changing age structure are the maturing of past birth cohorts, upward trends in life expectancy due to increase in survival rates at older ages, and falling fertility. Significant inquiry into the population aging phenomenon have shown that many countries will be flooded with elderly individuals who will tend to consume more than they contribute, leading to majorly altered asset values and income trajectories. However, in India its 65 and over population only represents one-fourth of its young adults and is not likely to outnumber the younger group for nearly 40 years to come. Enacting policies to meet education and training needs of India’s youth can ease the process of looking after the older Indians in the future. While there will be a decline in adult labour force participation as the population ages, this burden can be offset by the decline in youth dependency associated with declining fertility. Also, behavioural and policy responses to population aging include higher labour force participation of women, more savings for investment, and later age of retirement suggest that this threat might not impede economic growth. However, given the current reliance of older people on private families to provide them with care, companionship and financial support, this system will not be able to take the load of increased female labour force participation, widening generation gaps, and increasing burden of costly non-communicable diseases. There is at present a lack of institutions and policies to address these challenges in India : less than 10% of the Indian population has health insurance and 90% of the elderly don’t have a pension source. Thus, India is likely to benefit from collecting relevant data and using it to devise an appropriate set of public institutions. Population heterogeneity – India possess various sources of major heterogeneity in the form of culture, education, income, language, religion, and social status, among many others. India is a very heterogeneous country demographically, with many of the demographic indicators varying majorly across states. One of the main indicators of potential for demographic dividend – ratio of working-age to non-working-age population shows that Tamil Nadu and Bihar vary as much as Ireland and Rwanda in today’s time. Other demographic indicators like Total Fertility Rate show a similarly large range of heterogeneity. Total Fertility Rate various by a factor of more than 3 between Kerala and Uttar Pradesh. There is a large variation in the life expectancy too with a difference of 14 years between Kerala and Madhya Pradesh. This heterogeneity can lead to productive collaboration but can also be the cause of social and political unrest and instability, particularly when it is accompanied by economic inequality. Also, the cross-state correlation between the ratio of working-age to nonworking-age population and income per capita was +0.64 in 2001. Researchers after examining India’s cross state heterogeneity have also found a strong association between per capita income and health status of the population. They have also found out that effect of life expectancy on net domestic product is much higher than the effect of conventional inputs of capital and labour for Indian states. It is very crucial to consider these demographic differences within India, as differences in economic growth rates by state can worsen the political fractions and inequality within India.

Urbanization and health – India is becoming more urbanized as in the fraction of people living in urban areas has been increasing. This has advantages as well as disadvantages. With urbanization there has been a sharp rise in chronic diseases because of decline of infectious disease mortality, tobacco consumption, nutrition patterns, and urban living and a more sedentary lifestyle. People living in cities are exposed to greater pollution levels, are subjected to higher stress levels and chronic illnesses like hypertension and diabetes. Increased prevalence of chronic diseases will pose serious threat to India’s economic and physical well-being. There are however aspects of urbanization that promote economic growth too. Some of them being increased work opportunities, lower fertility rates when women enter the labour force, ready learning of enterprises from each other, and easy transportation of people and goods. There is also greater availability of healthcare. All this means that increased urbanization may offer advantages that can propel economic growth. India has several opportunities to reap the benefits of its favourable demographics. First being the wider and deeper investments in health. A significant step in this direction has been taken by establishing Public Health Foundation of India and the National Rural Health Mission which will serve the purpose of further investments in the promotion and protection of health. Second involves the acceleration of fertility decline. There are various approaches to promote fertility decline. First is the expansion of family planning services in a way that is respectful of people’s reproductive rights. Second involves efforts to promote infant and child survival. Vaccines against childhood diseases are one potent way to realize an improvement in child survival. These vaccines also promote better school attendance, better cognitive function, and better adult health making more productive children and hence higher-earning adults. Third is girl’s education that serves as both indicator of development and an instrument for promoting fertility decline. Education in general also plays a major role to play in India’s ability to capitalize on the demographic dividend. Education, especially secondary and tertiary levels will equip India’s youngsters with the skills they need to be productive in the global economy. Policymakers should be wary of the misleading statistics like enrolment ratio because that does not guarantee attendance and also does not tell anything about the quality of education. The main thing that Indian policymakers need to understand is that realization of demographic dividend depends on economy’s capacity to absorb workers into productive employment. This capacity is strengthened by good governance (well-functioning institutions, respect for the rule of law, low level of corruption, respect for property rights) , efficient infrastructure ( reliable roads, railways, telecommunications, water supply, sanitation, and agricultural needs), prudent fiscal and macroeconomic management ( policies that keep inflation reasonable, promote inclusive economic growth, avoid major trade imbalances), well-developed and competitive financial markets ( institutions that facilitate mobilization of savings, ensures that banks and other financial institutions serve the public interest) and labour markets ( balance between employers and workers) , and investments in education and training ( strength in all levels of schooling for females and males of all income levels and castes, job training for workers so that they can keep up with new types of services and industries.) * COVID-19 has demonstrated that neither do we have the health wherewithal nor the requisite social infrastructure to sustain such a huge population. In which another country of the world do 8.5 lakh people live in a 2.5 square kilometres of the area? The population over age 50 and those suffering from chronic diseases are at a higher risk for severe infections and deaths due to Covid-19. The population of the elderly has increased in India since the census 2011 and more so in urban areas. Lack of sanitation and handwashing facilities compounded with congestion at homes makes it difficult to follow social distancing and maintaining proper hygiene and sanitation. Given the population size of the elderly, prevalence of comorbidities, proportion of the population lacking basic water, sanitation and hygiene facilities, education level and the media exposure among household with at least on elderly, some areas of India are more vulnerable than the others. -The potential outreach of the COVID-19 pandemic across India : The potential outreach analyses were that the epicentres of COVID-19 have thus far been mostly concentrated in and around Mumbai in Maharashtra. As Kerala and also Karnataka recovered quite quickly, the sooner epicentre in southern India was wiped out during the latter lockdown phases (however, infections have risen sharply in Tamil Nadu towards the top of the ultimate lockdown phases in May 2020 as restrictions have relaxed.) The eastern a part of the country now faces the approaching threat of becoming an epicentre if COVID-19 cases are transferred to it because of return migration, especially by the attempted/ongoing homecoming of the various currently unemployed migrant labourers within the western and southern reaches of the country. -Epidemic susceptibility index : Large areas of south-western and northern India, covering most districts of Kerala, Tamil Nadu , Telangana, Andhra Pradesh , Karnataka, Maharashtra, Gujarat, Rajasthan, Delhi, Haryana and Punjab are highly vulnerable to this pandemic. Primarily, these were the areas where the initial outbreak occurred and therefore the subsequent transmission of COVID-19 has been phenomenal, with people therein being seemingly less ready to deal with the COVID-19 virus. Possibly, the prevalence of urbanization which creates congestion, the burden of non-communicable diseases and a greater proportion of the elderly population in these regions may have heightened the general epidemic susceptibility. Contrarily, almost all districts in the seven northeastern states of Assam, Meghalaya, Manipur, Tripura, Mizoram, Arunachal Pradesh and Sikkim fall under the low to very low COVID-19 susceptible class. The northern, central and eastern parts of India comprising of Odisha (Orissa),

Chhattisgarh, Jharkhand, Madhya Pradesh, Uttar Pradesh, Bihar and West Bengal are moderately susceptible to the pandemic. -District-wise socioeconomic susceptibility : Large portions of eastern, north and north-western India are high to very highly socioeconomically vulnerable to this deadly virus and are likely to be most suffering from it. These areas are particularly characterized by high population densities, chronic malnutrition, poor health infrastructure, larger family sizes, poor hygiene practices, poverty concentration and marginalization including lower health-related knowledge and awareness, thereby precipitating such outcomes. On the contrary, most districts within the northeastern, southern and extreme northern region (e.g. within the northern a part of Rajasthan and in Punjab, Himachal Pradesh, Jammu and Kashmir and Uttarakhand), are found to be socioeconomically less susceptible in terms of COVID-19 transmission. -District-wise socio-economic vulnerability : The socioeconomic vulnerability to the COVID-19's impa...