Nickeled & Dimed

Penny for your thoughts?

We are accepting articles on our new email:

Population Growth and Economic Growth

Population growth is a matter of serious concern to all economies and is a subject that is embedded while discussing economic growth. While population explosion-related concerns became a debated topic in India in the recent past, several other countries have been dealing with low population growth. Population growth implies that the basic factor of production, labour, increases and thus, increases total output, but the per capita output could be inversely affected too. The relationship is complex and is approached from different angles.

Economic growth models, such as the Solow Model, assume a negative relationship between population growth rate and economic growth. A larger population means a larger labour force and hence greater production, but capital deepening whereby the capital per worker increases is crucial too. A large productive workforce coupled with technology that makes the labour force productive is essential to increase production, rather than a mere increase in population. While this argument is valid, certain prevalent alternative lines of reasoning stress the notion of population explosion. There exists a positive relationship between environmental degradation and population growth which further reduces the quantity and quality of natural resources available per person. Congestion, traffic, waste generation, declining green cover are a few other factors to consider. That being said, population explosion is viewed in a negative light while low birth rate (low fertility rate) and a low ageing-population are favored alongside low population growth. 

Nevertheless, even such a case cannot be generalized because some economies suffer from low birth rates. China in 1979 had introduced the controversial one-child policy to try to slow the problem of population growth. Today the concern of the world’s most populous country is the declining birth rate which in 2019 was the lowest level in 70 years. In 2015, China had replaced the one-child policy with a two-child policy. Similarly, Iran’s annual population growth had dropped below 1%. From having enforced population control policy, today it is forced to declare, “vasectomies can no longer be carried out at state-run medical centers and contraceptives will only be offered to women whose health might be at risk”. These indicate the multifaceted nature of population growth. 

Turning to India, the second-most populous country in the world, it accounts for 17.7% of the world population. Prime Minister Narendra Modi made a profound remark on the 73rd Independence Day, whereby he applauded those considering smaller families and commended such a move as a form of “patriotism”. However, when public interest litigation and bills to enforce mandatory two-child policy were proposed, the Health Ministry and the Supreme Court had wisely repudiated the call whereby those with more than two children would be denied access to government jobs and subsidies. Accepting this request would have done more harm than good to the economy of India based on the statistical evidence we have.

The 2018-2019 Economic Survey highlights the sharp slowdown in population growth that India would experience in the next two decades. While the population growth rate would be less than 1% during the decade 2021-2031, it would further reduce to under 0.5% between 2031-2041. The fertility rate concedes a similar trend. The National Family Health Survey 4  states that the fertility rate of women aged between 15 to 49 years has dropped to 2.2 children per woman in 2015-2016 from 3.4 in 1992-1993. This trend is projected to continue and even without any intervention, the rate will be down to 1.93 by 2025, and to 1.8 by 2030. By the many schemes to educate families on family planning, the population growth rate has reduced to 17.6% during the 2001-2011 period as compared to 21.5% in the previous decade.

Having signed the International Conference on Population and Development declaration in 1994, India has to stand by its vow to honor the reproductive rights of couples and let them decide when and how many children to have. Despite this, several states like Assam, Gujarat, Uttarakhand, Maharashtra, Rajasthan, Odisha, Karnataka, Andhra Pradesh, and Telangana have some form of coercive two-child policy for those applying for elected government jobs and posts. While the government’s analysis finds that such a policy is not necessary, the norm still prevails. 

The consequence of over-regulating the population where it is not necessary, as is the case now, would be pushing India into a crisis period in the future like China, Iran, and many other countries. Sex selection would increase affecting the sex ratio, causing increased discrimination against the girl children. Consequently, women from lower socio-economic communities are likely to be unfairly affected. On the economic side, the improvement in health care facilities will increase the ageing population when coupled with low birth rates, but an ageing population comes with myriad problems.

For instance, China had not only witnessed a decline in population growth but also experienced a decline in the working-age population and an increase in the ageing population alongside an increase in the old-age dependency ratio. This puts pressure on the public fiance—old age pension and health expenditure. Another implication is the declining savings rate. According to the Life-Cycle Hypothesis model of savings behavior, the propensity to save is negatively correlated to the dependency ratio. Consumers ideally want to even out their consumption over their lifetime where income fluctuates depending on their age. Due to this notion of consumption smoothing, the savings rate will be lower when the dependency ratio is high implying that a large percentage of the population is very young or is over the retirement age. This theoretical interpretation (not always true when based on evidence) holds when controlling for other major determinants of household savings. Assuming this model holds, a high dependency ratio and low savings rate can impact capital accumulation which is integral for economic growth. These are a few of the many consequences when such a policy is mismanaged.

India does not need a two-child norm, instead, it needs effective policies that will lead to the overall development of all its citizens. According to NFHS-4, as many as 30 million married and 10 million young women have no access to contraceptives, although they want to delay or avoid pregnancy. The focus should be to improve education and health care facilities, create awareness and ensure the needy have access to population control techniques, instead of stripping the citizen’s freedom. As the nation’s population growth rate is already on the decline, policies must ensure that a decent rate of fertility is maintained, because even a very low fertility rate would be detrimental to growth in the long run. 

During a 1974 World Population Conference in Bucharest, Dr. Karan Singh, India’s Minister of Population, said “Development is the best contraceptive.”  Several scholars share this view that economic development itself would reduce the fertility rate. Reduced mortality rates, increased life expectancy through better health care, a higher level of education, and improved female literacy and independence as compared to the past have resulted in lower population growth. The progressive trend suggests that population explosion could be handled in a better way by focussing on development over coercive laws.

Author Bio: Gby Atee is a second-year student at Ashoka University pursuing her major in Economics.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: