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Economics Deconstructed- 3rd Place

By Abhigya Asmi, Sophia College for Women.

Decoding India’s population obsession : Examining the consequences of India’s declining fertility rate and how it affects the economy

A 2019 UN report forecasted that “India will surpass China as the world’s most populous country by 2025 and will remain the most populous country through the end of current century”. However, population statistics reveal a different reality. According to the National Family Health Survey-5 (2019-21), India’s Total Fertility Rate (TFR) has fallen below the replacement level. The World Health Organisation (WHO) defines TFR as the average number of children a hypothetical cohort of women would have at the end of their reproductive period if they were subject during their whole lives to the fertility rates of a given period and if they weren’t subject to mortality. It is expressed as children per woman. Replacement level is the level of fertility at which a population replaces itself exactly from one generation to subsequent. It is set at 2.1, indicating that the population either grows or declines, signifying that it is steady. With India’s fertility rate declining from 2.7 (NFHS 2005-06) to 2.0 (NFHS 2019-21), the demographic shift is pointing towards an ageing population. This is an indication that the existing population is not producing enough offspring to replace itself, resulting in the majority of the population growing older in the coming years. The fertility rate is 2.1 in rural areas and 1.6 in urban areas.

One of the key factors of this decline has been the increase in women’s control over their lives. The percentage of women marrying before the age of 18 years has gone down. According to NFHS 2019-21, the number of women participating in family planning and key family decisions has increased from 37% to 89% in the last decade and a half. Women also prove to be more informed than men in general. Increasing female literacy rates has a significant role to play in empowering women and helping them make informed decisions. With increased literacy levels, India has seen a progressive drop in TFR, which is now 2.1 for literate women and 2.5 for illiterate women. This is supported by data from individual states, which reveal that states with lower female literacy rates, such as Bihar and Jharkhand, have higher TFR.

More significantly, there has been an increase in the use of contraceptives. In comparison to the last NFHS, there has been a 13% rise in the use of contraceptive techniques. This demonstrates a wider awareness towards contraceptive measures. Contraceptive measures are now being used by an average of 67% of people, and institutional births have increased from 79% to 89%, which is a remarkable accomplishment. At the same time, India has seen a sharp decline in infant mortality as a result of improved health infrastructure, maternal health, postnatal care, and immunisation knowledge. The impact of aggressive government-initiated family planning initiatives such as the National Family Planning programme and Mission Parivar Vikas also play a part in the demographic change and suggests that these schemes have different levels of reach in different parts of India.

Shrinking family size in urban homes is also a contributor to declining TFR. Cities like Bangalore, Mumbai, and Delhi NCR have a younger and more mobile workforce. Due to a higher cost of living, people are not willing to have a larger family as it would mean more mouths to feed. There is also a trend of increased fertility among older women in metropolitan regions since more educated women are able to postpone marriage and childbirth. In comparison to rural families who regard more children as more hands to work, urban families regard a child as a liability until they reach adulthood. To the latter, the cost of raising a child often outweighs the benefits of having one.

During COVID-19, economic uncertainty has had a substantial impact on fertility rates both globally and in Low Middle-Income Countries (LMICs) such as India and Bangladesh. As per evidence, economic recession and poverty have an impact on fertility rates. While it was predicted that India might experience a baby boom during the lockdowns, all of these rumours were put to rest. Economic setbacks and curbing measures due to Covid-19 have had a long-term impact on fertility rates. The measures resulted in limited access to healthcare and hesitance to visit healthcare facilities. Many were resistant to conceiving due to economic difficulties and fear of contracting the virus. However, an interesting trend was noticed among the higher age groups (31- 46 years), who expressed an increased desire for parenthood during the pandemic.

State-wise data

Of the total 37 states, 32 of them witnessed a decline in fertility levels. Bihar, Uttar Pradesh, Jharkhand, Meghalaya, and Manipur had the highest levels, with most of them having an average rate of 3.0, which is greater than the national average. Even though Bihar is one of the states with the highest rates, it saw a significant drop from 3.4 to 3, as compared to the last survey. Moreover, although Tamil Nadu and Kerala witnessed a reverse trend in the last five years, with TFR increasing from 1.7 to 1.8 and 1.6 to 1.8, respectively, they still had one of the lowest fertility rates in the country.

The Uttar Pradesh government recently floated a proposal in order to control the population explosion that focuses on disincentivizing couples from having more than two children and will reward people with only one child. However, the TFR of UP, even though being one of the highest in the country, is on the decline and indicates such drastic measures may not be required yet. The implementation of this population control law may also result in demographic imbalance, sex-selective abortions, and increased economic disparity. This bill, however, is still open for discussion till July 2022.

Impact on the Indian economy

While a decrease in fertility is a welcome relief for India's economy and its entrenched reputation, it does not necessarily imply a significant reduction in population. However, this will result in population stabilisation, which will allow resources to be directed toward problems and demands related to the quality of life rather than catering to a large population and substandard

living. A large labour force has typically been regarded as a positive aspect because it implies more productive manpower. The working-age population will continue to grow till 2040, which will provide a window of opportunity for India's economic growth to accelerate. India, which is largely a labour-intensive economy, can take advantage of this period. Young people have the incentive to save as compared to older generations; they also increase the national savings rate. However, appropriate policies and increased investment in public health are necessary, as it is a known fact that a healthier workforce is more productive. Education also plays an important role in India's ability to capitalise on the demographic dividend: education, particularly secondary and tertiary education, will provide India's youth with the skills they need to be productive in a fast-moving and unforgiving global economy where knowledge and skills hold sway. Attention must be paid to education infrastructure if the younger population profile is to be utilised; otherwise, it may result in a significant number of unemployed and/or underemployed individuals, which can be a demographic nightmare rather than a demographic dividend.

Falling fertility and increased longevity are all reliant on the nation's health. A healthy population is consequential for economic performance. Although macroeconomic policymakers regard population health as a social indicator of developed countries, it also serves as a GDP instrument. With life expectancy rising, and a demographic shift from a young nation to an ageing population, in the long run, a robust healthcare system is required to ensure that the elderly are taken care of in terms of daily requirements and medical bills. Policymakers may also propose raising the retirement age.

A high population is not necessarily a bad thing for the economy, especially in the long run. What the theory's proponents fail to recognise is that for an economy to grow gradually, it needs a steady influx of workers to contribute to growth. The peak of the working population, as well as less manpower, imply a scarcity of skilled and unskilled human resources. Labour-intensive markets will suffer as a result of shortages, slowing growth in many vital industries and reducing a country's economic competitiveness. It also has an impact on domestic market growth because there will be fewer consumers. The remaining consumers, who will be older groups, are a strain on the economy, and as the working population shrinks, these liabilities grow unsustainable and constitute a threat to many leading countries.

References :

Ullah, Md. Asad et al. “Potential Effects of the COVID-19 Pandemic on Future Birth Rate.” Frontiers, Frontiers, 1 Jan. 1AD,

Muthyanolla, Sai Krishna, and Pavithra K M. “SRS 2018 Shows the Strong Correlation between Education Level & Fertility Rate.” FACTLY, 9 July 2020, /.

“National Family Health Survey (NFHS-5) 2019-20 Fact Sheets: Key Indicators – 22 States/UTS from Phase-I.” People's Archive of Rural India, 20-fact-sheets-key-indicators---22-statutes-from-phase-i/.

Gera, Ruchika Chitravanshi and Ishaan. “Not-so-Young Future as India's Fertility Rate Dips, Shows Data.” Business Standard News, Business-Standard, 25 Nov. 2021, utility-rate-dips-shows-data-121112501551_1.html.

Vanamali, K. V. “Is a drop in India's fertility rate bad news for the economy?” Business Standard, 26 Nov. 2021, -news-for-the-economy/.

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