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Economy

India Needs Employment Generation, Not Population Control

India is on its way to completing its demographic transition. It should stop fretting about the population problem. Instead, it needs to invest massively in education and health and provide stable, well-paying jobs.

In recent weeks, the enormity of India’s “population problem” seems to have suddenly gripped the Bharatiya Janata Party (BJP) leadership.

Following the lead of Assam, the state of Uttar Pradesh has also started preparations for introducing a population control law. BJP’s national secretary, C.T. Ravi, has pushed for a similar population control law for yet another BJP-ruled state, Karnataka. BJP MPs Rakesh Sinha and Anil Aggarwal have put in notices to table population control Bills in the national parliament soon.

Is it really the case that India faces a serious population problem? Does India really need a population control policy? Both questions have the same answer: a resounding no!

A population control policy for contemporary India has very little justification in logic or facts. India is well on its way to completing its demographic transition. It should stop fretting about the population problem once and for all. It should stop ill-conceived attempts to legislate population control policies.

Instead, India needs to focus on the potential demographic dividend that has opened up for it. It needs to invest massively in education and health that will educate its workers, impart useful skills and make them healthy. It needs to put in place policies and institutions that will provide stable, well-paying jobs for them.

Also read: UP: 50% Of BJP MLAs Have 3 or More Children, Would Violate Draft Population Control Bill

What is the demographic transition?

Study of the historical experience of modern economic growth across the world has established a robust pattern of demographic change that demographers and economic historians call the ‘demographic transition’. This refers to a distinct, three-stage, pattern of demographic change that accompanies economic growth.

In the first stage, when countries are relatively poor, they have both high birth and death rates. The high birth and death rates balance each other. Hence, in the first stage, the overall population growth rates are low.

In the second stage, the death rate declines faster than the birth rate driven by improvements in sanitation, hygiene, control of infectious diseases through antibiotics and vaccination. Hence, in the second stage, the growth rate of the population rises.

In the third and final stage, the birth rate declines faster than the death rate, as families change their fertility patterns driven by rising economic prosperity, lower infant mortality rates, rising rates of women’s education, changing family structures, and development of institutions of old-age care and social security. The third and final stage is marked, once again, by a low population growth rate.

Thus, as any country moves through the demographic transition, its population growth rate starts from a relatively low level, rises for an extended period (the length of the period depending on how quickly the birth rate declines in the second stage of the transitions), and finally falls back to a low level again when the transition is completed.

What is the demographic dividend

The evolution of birth and death rates during the demographic transition impacts the age structure of the population, which, in turn, has a very important effect on economic growth.

As an economy moves through the stages of the demographic transition, the ratio of the working age population (15-64 years) to the non-working age population (0-14 and 65+ years) first falls and then rises.

During the second stage of the demographic transition, the death rates fall but birth rates are still relatively high. Hence, both the number of children (0-14 years) and the number of the elderly (65+ years) increase as a proportion of the total population the former because of the high birth rates and the latter because of the decline in the death rates. Hence, the ratio of the working-age to the non-working age population falls.

In 20-25 years, the cohort of children become adults and join the working age population. Simultaneously, the birth rate continues declining because of changes in household fertility behaviour. Hence, the ratio of the working-age to the non-working age population reverses its falling trend and starts rising.

Also read: Rural India Sinks Deeper into Debt as COVID-19 Wipes Out Work

The period during which the ratio of the working-age to the non-working age population rises is a period of great economic opportunity for an economy. If it can provide stable, well-paying jobs to the rising number of working-age adults, then the country can push up its economic growth rate and rapidly improve the living standards of its population. That is why economists and demographers refer to this as a period of potential ‘demographic dividend’.

But here is an important thing to keep in mind. The demographic dividend is not automatic. If enabling policies and institutions are not in place that can generate adequate levels of employment, the bulge in the working-age population will not lead to economic growth and prosperity. It will instead become a demographic disaster marked by rising unemployment, underemployment and precarious, informal employment, which, in turn, will generate social instability, strife and misery.

Shoe-makers work in an underground workshop in Agra, India, June 9, 2017. Picture taken June 9, 2017. Photo: REUTERS/Cathal McNaughton

India’s demographic transition and dividend

Starting from a high magnitude in the 1950s, both the birth rate and the death rate has declined over the next seven decades in India (see Figure 1). In 1950-55, the birth and death rates were 43.6 and 26.4 per 1000 population; in 2015-20, the corresponding numbers were 18 and 7 per 1000 population respectively.

Figure 1: India’s demographic transition as captured by the declining birth and death rates. Data Source: World Population Prospects 2019. United Nations Department of Economic and Social Affairs, Population Division.

The decline in the birth rate and the death rate did not proceed at the same rate over the decades. In the period from the 1950s to the 1970s, the death rate declined much faster than the birth rate. That is why the average population growth rate displayed an increasing trend during the three decades from the 1950s to the 1980s (see Figure 2). From the 1980s, the decline in the birth rate gathered steam and outpaced the decline in the death rate. This led to a steady decline in the average growth rate of the population (see Figure 2).

Average annual population growth rate was 1.71% in 1950-55, which peaked at 2.31% in 1980-85 and has steadily declined since then, to become 1.04% in 2015-20.

Figure 2: The rising and then falling growth rate of India’s population. Data Source: World Population Prospects 2019. United Nations Department of Economic and Social Affairs, Population Division.

The graphic below (see Figure 3) shows the age structure transition in India which corroborates the above patterns associated with the demographic transition. The ratio of working age and non-working age population was 1.46 in 1950. It declined to its lowest value of 1.23 in 1965. Since then, it has steadily increased, reaching 2.05 in 2020.

Figure 3: The rising ratio of working-age persons (15-64 years) to non-working age persons (0-14, 65+ years) in India. Data Source: World Population Prospects 2019. United Nations Department of Economic and Social Affairs, Population Division.

Given this demographic dividend, how is the Indian economy doing in terms of generating good quality jobs? To answer this question, we must look at the structure of employment in India by distinguishing between formal and informal employment.

According to the National Commission for Enterprises in the Un-organised Sector (NCEUS 2007, informal employment ​does not ​provide “employment security (no protection against arbitrary dismissal), work security (no protection against accidents and illnesses at the workplace) and social security (maternity and health care benefits, pensions, etc.)”. Thus, the larger the share of informal employment, the worse off the working population. If India is to take advantage of the demographic dividend, it must generate adequate formal employment.

Figure 4: The share of formal and informal employment in India. Data Source: NCEUS (2007); Salapaka (2019).

The above graphic (see Figure 4) presents evidence that the share of informal employment has hardly changed in India over the last two decades. In 1999-00, 91.2% of employment was informal; in 2017-18, the latest year for which we have data, the share of informal employment was 90.7%.

The evidence presented here should convince us that the key problem facing contemporary India is not population growth but rather inadequate quantity and quality of employment. India needs robust policies to generate adequate quantities of high quality employment, not ill-conceived policies of population control.

Deepankar Basu is associate professor in the Department of Economics, University of Massachusetts Amherst.