1. Liberalisation of the economy has seen India prosper as never before.
2. Increased wealth has led to greater demand for goods and services, making India a growing market.
3. As wealth has increased, education levels have also risen, resulting in slower population growth.
4. For the first time in the country’s recorded history, families with two or less children are now in the majority.

Fairly soon after becoming independent, India’s first Prime Minister, Jawaharlal Nehru, a self-declared Fabian Socialist, embarked upon a strategy to make India self-sufficient. The objective, while notable, eventually led to a decline in India’s growth rate, which was disparagingly referred to as the “Hindu rate of growth”. Nehru’s objective in the 1950s was to raise per capita income and industrialisation was the mechanism by which that goal would be achieved. The Nehru-Mahalanobis strategy (named after Prasanta Chandra Mahalanobis, a celebrated statistician), was to rapidly build capital machinery, these being perceived as critical to every manufactory line. This strategy notwithstanding, the first and second Five Year Plans, a national economic development model borrowed from the Soviets, emphasised agricultural production. India’s “Green Revolution”, which saw agricultural production surge, ensured more food for its starving millions and reduced, to a large extent, the country’s dependence on foreign charity, and on food imports in general. The inherent policy contradiction, however, degraded the efforts at industrialisation.

As a consequence of this contradiction, India’s economy grew by a mere 1.7 per cent between 1950 and 1965. That dismal growth rate is further diminished by the fact that the economy was in dire straits at the time. A major function of India’s diplomatic staff, therefore, was to solicit foreign aid, which left the country vulnerable to foreign influence. To make matters worse, Nehru’s death in the 1960s led to a period of further economic stagnation, so dependent was the country upon his leadership. The election of his daughter, Indira Gandhi, to the office of Prime Minister, did not alleviate matters.

It is difficult not to hold Nehru and his daughter responsible for India’s economic stagnation, given the natural affinity for business growth, as is evinced by the country’s economic surge since the early 1990s. This claim may be substantiated by the average growth rate of 6.5 per cent between 1980 and 2007. It was the drastic measures taken in the early 1990s by the PV Narasimha Rao government that laid the foundations for India’s current economic growth. Singh, who would later be elected Prime Minister, opened up the economy to the world, thus giving India’s business community the opportunity to grow it.

India is generally recognised today as being the world’s fast-growing major economy. The World Bank estimates that the economy will grow by around 7.6 per cent in the 2016-17 financial year and 7.7 per cent the next, stating that:
In India, GDP growth will remain strong at 7.6 per cent in 2016 and 7.7 per cent in 2017, supported by expectations of a rebound in agriculture, civil service pay reforms supporting consumption, increasingly positive contributions from exports and a recovery of private investment in the medium term.

As if to emphasise its claim to major growth, India’s economy has overtaken that of Great Britain to become the world’s sixth-largest. It was estimated that that milestone would be achieved in 2020, but the reduction in the value of the pound sterling in the aftermath of the Brexit issue hastened the process. The decline in the value of the pound by around twenty per cent has seen the UK’s GDP of £1.87 trillion equate to US$2.29 trillion, while India’s GDP of 153 trillion rupees equates to US$2.3 trillion. While the difference in the sizes of the two economies may appear to be relatively trivial at this point in time, it is expected to widen given India’s estimated growth rates to 2020 and the projected UK growth rate of between one and two per cent in the same period. It is very likely, therefore, that, even if their currencies fluctuate within that time frame, India’s economy will continue to outstrip that of the UK.

One further point is to be made in this regard. China, the world’s second-largest economy, has recently given up on meeting its projected target of 6.5 per cent economic growth as its leaders contend with various economic issues, including real estate and financial bubbles, falling manufacturing and export rates and capital outflows estimated at US$1 trillion in 2015. As investor confidence in the Chinese economy wanes, India could be seen as a viable alternative. The simplification of India’s tax regime via a consolidated Goods and Services tax and other measures can only see the economy become more industry-oriented and Indians begin to consume more goods and services – an outcome that China seeks to replace its export-oriented economy – thus facilitating this outcome. The reports that Apple may begin manufacturing its iPhones in India could, as an example, be a herald of this perception.

In short, if the Modi Administration fulfils its promise of making India an attractive destination for manufacturing and foreign investment, the country’s economy will grow at the projected rates.

Demographic Prospects
India is the world’s second most-populous country, with a population estimated at around 1.29 billion in July 2016. It is a veritable mix of languages spoken, religions and cultures. The population of India’s northern states comprises people of Aryan descent while those from the southern states are, for the most part, of Dravidian stock. The majority of people in the eastern states have a Mongoloid background. Hindi, the lingua franca of the north, and English are two of the twenty or so officially-recognised languages; there are an estimated six hundred dialects spoken by significant numbers of Indians. India has given rise to Hinduism, Buddhism and Jainism and has people who profess the Christian, Jewish and Muslim faiths. It also numbers Zoroastrians (Parsees) and animists among its citizens.

It was recently reported that, for the first time in the country’s recorded history, families with two or less children are in the majority. Around 54 per cent of married women had two or less children in 2011, in contrast to around 46 per cent according to the 2001 census. There were, overall, around 340 million women who had around 920 million children, giving an average of around 2.7 children per woman. This is in contrast to 270 million married women who had 830 million children at an average of 3.03 children per married woman in 2001. It must be noted that women in wealthier states such as Punjab have a fertility rate of around 1.7 children while those in poorer states like Bihar have rates of around three. This drop in the number of children is the largest noted. As more women become educated and enter the workforce, birth rates tend to drop. With increasing rates of contraceptive usage, furthermore, women defer having children or choose to have fewer children.

It is interesting to note that the average number of children that women in the 45-49 years age group have borne has plummeted by around 16 per cent between 2001 and 2011; there has been a corresponding decrease of around 14 per cent by Muslim women in the same time period. This would appear to indicate that economic imperatives, coupled with increasing female literacy rates, have virtually the same impact on conservative and traditionally-minded communities as they do among the more liberal ones. The birth rates among Christians, at around 16 per cent, are the same as those of Hindus. It is important to note, however, that while there were 933 girls to every 1,000 boys born in 2001, the 2011 census showed a marked decline of 914 girls for every 1,000 boys born in 2011. It appears that despite laws enacted to prevent selective infanticide, the termination of female foetuses continues. This will have major implications for Indian population growth in the coming decades.

Life expectancy has increased from 38.7 years for men and 37.1 for women in the 1950s to 64.4 and 67.6 years, respectively, for men and women in 2011. Infant mortality has, similarly, plummeted from between 200 and 225 in 1947 to around 44 per one thousand live births in 2013. Despite falling birth rates, malnutrition still remains rampant among children under the age of five. UNICEF reports that 48 per cent of Indian children in that age group are physically small for their age. Those trends, should they continue, could see the number of aged dependents overtake the number of citizens of working age (18-64 years), presently around 64 per cent. This could have major ramifications for the economy in the coming decades.

It is not surprising, given India’s youthful population, that it has one of the world’s largest markets, if not the largest, for mobile telephones. By October 2013, around 875 million citizens (70 per cent of the population) had a mobile phone, with around 12 million new subscribers joining various providers every month. Interestingly, far more people had access to mobile telephones than to toilets.

There is another demographic trend that is noteworthy. With increased literacy and educational rates, more people who previously lived and worked in rural areas are migrating to the cities in search of work. It is estimated that 70 per cent of Indians live in rural areas, but around ten million move to the cities annually in search of work. As can be expected, this places extraordinary pressures on urban areas. The estimated population of Mumbai, India’s largest metropolis, for example, is around 21 million, over forty per cent of whom live in slums (Dharavi, Asia’s largest slum, is situated in Mumbai). The city’s population density is estimated at around 20,500 people per square kilometre.

In summary, India’s population will continue to rise, albeit ever slower, for the next few decades after which it will plateau and then decline. This trend is prevalent in virtually all developed countries and will, as India’s economy develops, prevail there too.

— by Lindsay Hughes, Research Analyst, Indian Ocean Research Programme,
Future Directions International Pty Ltd

Opinions or views expressed in this paper are those of the author