The Effect of Population Growth On Economic Growth

The effect of population growth on economic growth
1. INTRODUCTION
The population of India represents 17.99% of the world´s total population which arguably
means that one person in every 6 people on the earth is a resident of India. India is the second
most populated country in the world and is believed to surpass the population of China in
coming years. India is projected to be the world’s most populous country by 2024. Its
population growth rate is 1.13%, ranking 112th in the world in 2017. More than 50% of Indian
population is below the age of 25 and more than 65% below the age of 35. It is expected that
in 2020 average age of an Indian will be 29 years and dependency ratio will be just over 0.4.
Persons are means as well as ends of economic development. They are an asset if in adequate
strength and prove to be a liability if excess in strength. Population has crossed the optimum
limit in India and has become a liability. So problem of population explosion in India has
proved to be a big hindrance in the success of economic planning and development.
Population is means as well as ends of economic development in India. It an asset if in adequate

strength and prove to be a liability if excess in strength. Population has crossed the optimum
limit in India and has become a liability. So problem of overpopulation in India has proved to
be a big obstacle in the success of economic planning and development. The current population
of India contributes to 17% of the global population. Also, all these people are unevenly
distributed across 3.28 million square kilometers of our geographical area.
According to the 2001 Census, Uttar Pradesh is the highest populated state in India with a total
number of 166 million people. While on the other hand, states like Sikkim and Lakshadweep
have the lowest population of 0.5 million in Sikkim and only 60000 people in the island state
of Lakshadweep. Furthermore, about half of the India’s population is distributed into five major
states- Uttar Pradesh, Maharashtra, Bihar, West Bengal, and Andhra Pradesh. Though
Rajasthan is the largest state in size, its population contributes to only 5.5% of the total
population of India.
Although overpopulation has not affected the GDP and infect GDP of India has grown very
fast from last two decades. India is now 3rd largest economy with GDP (PPP) $10.40 trillion
but due to population explosion still it is ranked 116th country in terms of per capital income
and 130th position in terms of HDI. Population explosion is adversely affecting the standard
of living. Overpopulation creates the problems like unemployment, shortage of food, low per
capita income, problem of capital formation, high pressure, social problems, economic
insecurity, social insecurity, increases pressure on land and environment degradation.
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The economic planning and development of India, is very much influenced by the changes in
population. India with its increasing human resources and abundant natural resources is still
considered a developing country. India is still not in a position to use its natural resources
adequately for the welfare of the growing population. Poverty prevails to great extent in India
due to poor clothing, inadequate housing, poor medical care and malnutrition. The situation in
India today is marked in terms of lack of electricity in many villages, insufficient food for a
large part of its population and very little health care and education facilities.
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2. STATEMENT OF THE PROBLEM
Overpopulation does not depend only on the size or density of the population, but on the ratio
of population to available sustainable resources. It also depends on how our natural resources
are managed and distributed to the entire population. Overpopulation is one of the hazards and
serious problem, which creates a great hindrance in the way of economic development. It is
estimated that growth in human population affect the global land use pattern available for
agriculture, forest land cover, nearby area of different type of water bodies. The rapid growth
of human population is putting extraordinary pressure on our natural resources available e.g.
land, water, forests, ecosystem services etc. The purpose of this research paper is to highlight
the various adverse impacts of overpopulation and its impact on the economic development of
our country.
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3. DATA ANALYSIS, INTERPRETATION & PRESENTATION
3.1 DOES INDIA’S POPULATION GROWTH HAS A POSITIVE

EFFECT ON ECONOMIC GROWTH?
Overpopulation is a growing problem throughout the world at this stage in time. Currently, the
world population has crossed over the six billion mark and is on an exponential path upwards.
Yet, what does this do to the status of nations’ economies? Economists are torn between two
theories; one that states population increase and growth help a nation’s economy by stimulating
economic growth and development and another that bases its theory on Robert Malthus’
findings. Malthus states that population increase is detrimental to a nation’s economy due to a
variety of problems caused by the growth. For example, overpopulation and population growth
places a tremendous amount of pressure on natural resources, which result in a chain reaction
of problems as the nation grows. On the macroeconomic level, it is more believable to argue
that population does undermine a nation’s economy because an increase in the number of
people leads to an increase of the number of mouths to feed. The increase in demand for food
leads to a decrease in natural resources, which are needed for a nation to survive. Other negative
effects of population growth and, specifically, overpopulation include poverty caused by low
income per capita, famine, and disease. India is a prime example of Thomas Malthus’ theory
of population growth and its effect on the economy. India is a country plagued by poverty
primarily caused by overpopulation. Inhabited by over nine hundred billion people, India has
a population of three hundred million under the poverty line. A majority of the poor population
is unemployed, starving, and is being forced to beg on the streets to make ends meet. Yet, the
government isn’t showing any apparent signs of reform to decrease poverty among their
citizens, through welfare programs or fiscal spending. In theory, more people may mean a
country can produce and consume more goods and services, leading to economic growth. But
this can only occur when employment opportunities grow at least as fast as the labor force and
when people have access to the necessary education and training. This is a race that the Indian
government is losing. Rapid population growth complicates the task of providing and
maintaining the infrastructure, education and health care needed by modern economies.
Economists advocating the positive side to population growth, say that the growth creates new
problems that in the short run constitute to a number of problems, including famine, poverty
and even unemployment. Yet, they also state that in the long run, it leads to new developments,
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through advancement in technology, that leave countries better off than if the problems never
occurred. On one hand, theoretical elements suggest that more population retard the growth
output per worker. The overwhelming element in the theory is Malthusian diminishing returns
to labor, as the stock of capital does not increase in the same proportion as doe’s labor.
On the positive side, one can see a chain reaction of events caused by population growth.
According to the neo-classical growth model, population is beneficial to an economy due to
the fact that population growth is correlated to technological advancement. Rising population
promotes the need for some sort of technological change in order to meet the rising demands
for certain goods and services. With the increased populace, economies are blessed with a large
labor force, making it cheaper as well, due to its immense availability. An increase in labor
availability and a low cost for labor results in a huge rise in employment as businesses are more
inclined to the cheap labor. Low labor costs results in a shift of money usage from wages into
advancement through technology. According to this model, the technological advancement that
accompanies the growth of population and the expansion of population, allows for even more
population to survive due to the rise in overall outputs by the business and the nation as a
whole. Thus, it generates demands for goods and results in overall economic growth. The rising
population provides a supply of labor and contributes to the increase in output of goods. As
shown in Graph 1, technological advancements allow for a rise in output from Q to Q’. The
rise in total output meets the demands of consumers and the demands as the population keeps
rising. Thus, the increase in output generally raises the per capita income of a nation.
According to Julian Simon, a prestigious economist at the University of Maryland, the long run
benefits of population growth that links to economic development of poor countries are on the
positive balance, contrary to conventional wisdom. He figured that an increase in the numbers
of consumers and an increase of income, expand the demand for raw materials as well as
finished products. Naturally this would lead to a shortage in goods and services caused by the
high demand for products and services, forcing up prices for the natural resources. The
increased prices will trigger a search for new ways to satisfy the increasing demands in order
to meet expectations. Sooner or later new sources and innovative substitutes will be found. The
new discoveries lead to cheaper natural resources than existed before the increase in population
and the demand for goods and services begin. In turn, it leaves a nation better off than if the
shortages had never appeared, meaning the nation has gone through a process of economic
growth and development.
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Normally, through conventional wisdom, economists might argue that population growth and
overpopulation hinders the growth output per worker. The important factor to this theory is
Malthusian diminishing returns to labor, as the stock of capital, including land, does not
increase in the same proportion as does labor. Another important factor, that contradicts
Simon’s theory, is the dependency effect, which suggests that saving is more difficult for
households when there are more children and that higher fertility causes social investment
funds to be diverted away from high-productivity uses. These factors seem to suggest that high
fertility, and, more importantly, increasing population growth create a negative effect on output
per worker, and on the broader aspect, it creates negative economic growth.
Yet, empirical data does not support this a priori reasoning. Contemporary evidence provided
by a number of economists indicates there is a correlation between population growth and
economic growth and development. Although most of these economists found inconsistent
evidence to prove this theory, they did, generally, obtain the same data. Their reports concluded
that population growth does have a positive effect on less-developed countries (LDC’s).
Although some said the positive effects were very minimal and weak, the economists were still
able to use a simulation model for LDC’s and report that economic growth did occur.
Economists, Easterlin, Kuznets, Conlisk and Huddle, and Thirlwall all arrayed LDC’s by their
recent population growth rates and their economic growth rates, to examine for relationships
between the two. Easterlin assessed that "[his data] is clear…that there is little evidence of any
significant, negative association between the income and population growth rates. Kuznets
compiled data on 21 countries in Asia and Africa, including India. In the samples he took,
Kuznets reported no significant negative correlation between population growth and the growth
per capita. Conlisk and Huddle regressed the output growth rate on the savings rate and the rate
of population growth of 25 LDC’s, and announced that an increment of population has, ceteris
paribus, a positive effect on per capita income. These empirical studies do not necessarily show
that fast population growth in less-developed countries increases capita per income, although
most findings reported positive effects. But they do imply that one should not assert that
population growth decreases per capita economic growth in less-developed countries.
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To prove this theory, put forth by population economists, a model is constructed that includes
elements of the standard LDC models but it also embodies other elements: demand effects on
investment, work vs. leisure choice, and variations in work activity as a function of differences
in needs and standards of living and economics of scale. It also embodies shifts in labor,
depreciation, and land building. The model solves the theory by utility maximization, or finding
the highest leisure-output indifference curve that touches the production function (Q = {L, T,
K}). Looking at Graph 2, one can see that production function, based on hours of work and
total output (Q), can reach maximum utility through maximizing employment (L), land (T) and
capital (K). Using a variety of parameters, the simulation indicates that positive population
growth produces considerable better economic performance in the long run, because maximum
utility is achieved with a high output, based on labor and land.
Other economists seem to think otherwise, and oppose the theory that population growth has a
positive effect on economic growth. Basic theory surrounding population growth in less
developed countries states that the growth of a populace may eventually lead to overpopulation,
due to the simple factors of food, education, health, housing, and employment. Earth and its
resources are finite. Human ingenuity and efforts have limits to fulfill the needs of the
increasing numbers. The more heads there are in a nation means there are more mouths to feed.
This begins Malthus’ theory of diminishing returns when it comes to resources and food.
Malthus states: either people practice continence, restrain sexual impulses, or they breed
themselves into starvation. Population is said to be negative once productivity and output are
less than demand. Population growth, no matter how high or low it may be, results in a rise in
a nation’s populace. The rise in population will increase the demand for goods and services,
such as food, water, and a variety of other resources needed for survival. The demand
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indifference curve shows us a primary problem with population growth. If supply (based on
quantity and price) ends up lower than the demand for the supply of the good, the resulting
effect would be that of a shortage of goods. In the long run, the resulting shortage of goods and
services available to the rising population leads to starvation. Yet, starvation isn’t achieved
solely because of the shortage in goods. Since demands are high for resources and the resources
are depleted due to the population increase, the prices of the goods are raised, causing a shift
to the left in the supply curve. The rising price, in return, reduces the demand for certain goods,
unless the good is a necessity for survival, causing a shift in the demand curve to the left. The
decrease in demand is due to the insufficient income per capita, meaning consumers cannot
afford to purchase many necessary goods in the market. Due to the fact that the goods are now
unaffordable the consumers won’t be able to purchase the necessary food required to survive,
resulting in starvation, famine and even disease.
Another problem associated with population growth, which might lead to a decrease in
economic growth, is the problem of environmental degradation and resource scarcity. Earth is
comprised of 75% water, the rest is comprised of land, with a majority of it used for agriculture.
According to Malthus, population growth of a nation is detrimental to economic growth,
primarily due to the factor of finite resources in an economy. With a rise in the number of
people, a nation can expect a decline in the natural resources and in the end a lowering of the
production of goods. In a closed and stagnant economy with fixed natural resources, no capital
accumulation and no technological change, population growth and size determines the standard
of living as well as the state of natural resources.
To some economists, rapid population growth can be associated with downward pressure on
wages and worsening distribution of income, if not actual negative effects on the income per
capita. This is mainly due to the spreading of capital over larger number of workers or due to
the difficulties in raising the quantity and quality of investments in education and health. If it
is true that continuous rapid population growth is detrimental to the growth of per capita
incomes, while past population growth is beneficial to the economy once fertility decline sets
in, then the ultimate impact of population growth on the environment depends on the impact
made by economic growth. Past population growth seemed to be at a slower rate than what it
is now, and because of that factor economic growth thrived in the past, where as now, it seems
that the rapid population growth is detrimental to an economy due to its strains on resources,
cause for famine, disease, poverty and even unemployment. This is why most Malthusian
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economists urge governments to step up and curb the rapid population growth in order to
sustain economic growth.
Who is right, in asserting the positive or negative relations between population growth and
economic growth? In the case of India, one of the world’s most prosperous developing nations,
one can try to place India in the positive economic growth theory, or the negative economic
growth theory (Malthus’ theory). India is considered a developing country, although it is one
of the most affluent developing countries in the world due to recent economic growth.
Government reforms over the past six years brought about an unprecedented strong economic
performance. It grew at a rate of over 5 percent in 1992-93 and 6 percent in 1993-94, and 7
percent in 1997. While the GDP growth rates increase, India’s ranking over other nation’s GDP
keeps climbing, to number 6, behind countries like the US, Japan, China, Germany and other
wealthy developed nations. (See Figures 1, 2 and 3) Yet at a time of economic growth, India
seems to be going through an enormous population growth. Currently India has a population
of over 900 million and just about to reach the 1 billion mark. Although it may seem that India
is overpopulated, statistics show that the population growth rates have fallen over the years and
reduced the rate of growth.
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3.2 POPULATION CAN BE A LIMITING FACTOR TO

ECONOMIC DEVELOPMENT
1. Population reduces the Rate of Capital Formation:

In underdeveloped countries, the composition of population is determined to increase capital
formation. Due to higher birth rate and low expectation of life in these countries, the percentage
of dependents is very high. Nearly 40 to 50 per cent of the population is in the non-productive
age group which simply consumes and does not produce anything.
In under developed countries, rapid growth of population diminishes the availability of capital
per head which reduces the productivity of its labor force. Their income, as a consequence, is
reduced and their capacity to save is diminished which, in turn, adversely affects capital
formation.
2. Higher Rate of Population requires more Investment:

In economically backward countries, investment requirements are beyond its investing
capacity. A rapidly growing population increases the requirements of demographic investment
which at the same time reduces the capacity of the people to save.
This creates a serious imbalance between investment requirements and the availability of
investible funds. Therefore, the volume of such investment is determined by the rate of
population growth in an economy. Some economists have estimated that for maintaining the
present level of per capita income, 2 per cent to 5 per cent of national income must be invested
if population grows at 1 per cent per annum.
In these countries, population is increasing at the rate of about 2.5 per cent per annum and 5
per cent to 12.5 per cent of their national income and hence the entire investment is absorbed
by demographic investment and nothing is left for economic development. These factors are
mainly responsible for stagnation in such economies.
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3. It reduces per Capita Availability of Capital:

The large size of population also reduces per capita availability of capital in less developed
countries. This is true in respect of underdeveloped countries where capital is scarce and its
supply is inelastic. A rapidly growing population leads to a progressive decline in the
availability of capital per worker. This further leads to lower productivity and diminishing
returns.
4. Adverse Effect on per Capital Income:

Rapid growth of population directly effects per capita income in an economy. Up to ‘income
optimizing level’, the growth of population increases per capita income but beyond that it
necessarily lowers the same. In a sense, so long as the rate of population growth is lower than
the per capita income, rate of economic growth will rise but if population growth exceeds the
rate of economic growth, usually found in the case of less developed countries, per capita
income must fall.
5. Large Population creates the Problem of Unemployment:

A fast growth in population means a large number of persons coming to the labor market for
whom it may not be possible to provide employment. In fact, in underdeveloped countries, the
number of job seekers is expanding so fast that despite all efforts towards planned development,
it has not been possible to provide employment to all. Unemployment, underemployment and
disguised employment are common features in these countries. The rapidly rising population
makes it almost impossible for economically backward countries to solve their problem of
unemployment.
6. Rapid Population Growth creates Food Problem:

Increased population means more mouths to feed which, in turn, creates pressure upon
available stock of food. This is the reason, the under-developed countries with rapid growing
population are generally faced with a problem of food shortage. Despite all their efforts for
raising agricultural production, they are not able to feed their growing population.
Food scarcity effects economic development in two respects. Firstly, inadequate supply of food
leads to undernourishment of the people which lowers their productivity. It further reduces the
production capacity of the workers, Secondly, the deficiency of food compels to import food
grains which places as unnecessarily strain on their foreign exchange resources.
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7. Population and Farming:

In less developed countries the majority of population lives in, where agriculture is their
mainstay. The growth of population is relatively very high in rural areas and it has disturbed
the land man ratio. Further it has increased the problem of disguised unemployment and
reduced per capita farm product in such economies, as the number of landless workers has
largely increased followed by low rate of their wages.
The low farm productivity has reduced the propensity to save and invest. As a result these
economies suffer largely for want of improved farm techniques and ultimately become the
victim of the vicious circle of poverty. Thus reared farming and the process of overall
development.
8. Population and Vicious Circle in Poverty:
Rapid growth of population is largely responsible for the perpetuation of vicious circle of
poverty in underdeveloped countries. On account of rapid growth of population people are
required to spend a major part of their income on bringing up their children.
Thus savings and rate of capital formation remain low, reduction in per capita income, rise in
general price level leading to sharp rise in cost of living. No improvement in agricultural and
industrial technology, shortage of essential commodities, low standard of living, mass
unemployment etc. As a result the entire economy of an underdeveloped country is surrounded
by the vicious circle of poverty.
9. Reduction in Efficiency of Labor Force:

The labor force in an economy is the ratio of working population to total population. If we
assume 50 years as the average life expectancy in an underdeveloped country, the labor force
is in effect the number of people in the age group of 15-50 years. During the demographic
transitional phase, the birth rate is high and the death rate has declined and due to which the
larger percentage of total population is in lower age group of 1-15 years, which is small labor
force implies that comparatively there are few persons to participate in productive employment.
To overcome the demographic transition stage, it is essential for less developed countries to
bring down their fertility rate. Thus, we can conclude that labor force increases with the
increase in population.
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10. Rapid Population declines Social Infrastructure:

A welfare state line India is pledged to meet social needs of the people adequately and for this,
the government has to spend a lot on providing basic facilities like education, housing and
medical aid. But rapid increase in population make burden all the more heavy.
11. Adverse Effect on Environment:

Rapid population growth leads to the environmental change. Rapid population growth has
swelled the ranks of unemployed men and women at an alarming rate. Due to this, a large
number of people are being pushed in ecologically sensitive areas such as hill sides and tropical
forests. It leads to the cutting of forests for cultivation leading to several environmental change.
Besides all this, the increasing population growth leads to the migration of large number to
urban areas with industrialization. This results in polluted air, water, noise and population in
big cities and towns.
12. Obstacle to Self-Reliance:

The excessive population growth is an obstacle in the way of attaining self or reliance because
it obliges us to importance and more food articles in order to meet the needs of increasing
millions and on the other hand, it cuts down export surplus heavily. Reduction in exports makes
us unable to pay for imports and we have to depend on foreign aid. Thus, the aim of self-
reliance cannot be achieved without controlling the population.
13. Declining trend of Agricultural Development:

In less developed countries, mostly people live in rural areas and their main occupation is
agriculture and if the population increases the land-man ratio disturbed. Per capita availability
of land for cultivation declined from 1.1 acre in 1911 to 0.6 acre in 1971 in our country which
makes the size of holdings very small. The small size of holdings makes adoption of modern
technology means of irrigation and mechanization impossible.
This also leads to the occurrence of disguised unemployment and underemployment in the
agricultural sector. It leads to congestion and moreover to reduction in land available for
farming as well as for building houses, factories, hospitals, shopping centers, educational
institutions, roads and railway tracks etc. Thus, the growth of population retards agricultural
development and creates many other problems.
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14. Growing Population lowers Standard of Living:

The standard of living is determined by their per capita income. The factors affecting per capita
income in relation to population growth equally apply to the standard of living. The increase
in population leads to an increased demand for food products, clothes, houses etc., but their
supply cannot be increased due to the lack of cooperate factors like raw materials, skilled labour
and capital etc.
The cost and prices rise which raise the cost of living of the masses. This brings the standard
of living low. Poverty breeds large number of children which increases poverty further and
vicious circle of poverty. Thus, the consequence of population growth is to lower the standard
of living.
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3.3 EFFECTS OF OVER-POPULATION
1. Problem of Investment Requirement:

As we know Indian population is growing at a very high rate as compared to developing
countries. In order to achieve a given rate of increase in per capita income, larger
investment is needed. Though both GDP and per capita income of India increased over a
decade but due to overpopulation per capita income is increasing at a very slow rate. This
adversely affects the growth rate of the economy. In India, annual growth rate of population
is 1.15 percent as recorded in 2017 and capital output ratio is 4:1. It means that (4 x 1.15)
= 4.6 percent of investment is required to stabilize the existing Economic growth rate.
2. Effect on per Capita Income :

Large size of population and rapid rate of growth results into low per capita income. India
is now world’s 3rd largest economy but still at 116th rank for per capita income. Per capita
income has increased from last two decades but due to overpopulation it is increasing at
very slow rate.
3. Problem of Capital Formation :

Overpopulation in India hampers the increase in capital formation. High birth rate and low
expectancy of life reflects that there is large number of dependents in the total population.
In India about 35% of population is composed of persons less than 14 years of age. Most
of these people depend on others for subsistence. They are unproductive consumers and
reduce the capacity of the people to save. So the rate of capital formation falls. Therefore
access population is one of hindrance in the way of capital formation.
4. Effect on Food Problem:

Population explosion is one of the major causes of food problem in India. There is less
food production as compared to increasing demand. Due to overpopulation large portion
of agriculture land is shifting into construction of industries, houses, buildings, cities, roads
and other infrastructure. This leads to the shortage of food in the country.
According to a report, In 2017 India was ranked at the 100th position but now India has
been ranked at the 103rd position among 119 countries on the Global Hunger Index.
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5. Problem of Unemployment:
Unemployment is one of biggest challenge for the India. Unemployment is mainly caused
by Overpopulation. Large size of population results in large army of labor force in India.
But due to shortage of capital resources it becomes difficult for a country to provide gainful
employment to the entire working population. Open unemployment in urban areas and
Disguised unemployment in rural areas are the normal features of an under developed
country like India.
6. Low Standard of Living:

Rapid growth of population accounts for low standard of living in India. Even the bare
necessities of life are not available adequately. As the population increase pressure on
healthcare centers, education departments, transporting services, railways, and other public
services increases.
7. Burden of Unproductive Consumers:

Due to overpopulation In India, a large number of children are dependent. Old persons
above the age of 60 and many more in the age group of 15-59 do not find employment. In
2001, working population was 39.2 percent while 60.8 percent are unproductive workers.
This high degree of dependency is due to high rate of dependent children. This dependency
adversely affects effective saving.
8. Poverty :
Poverty is one of the biggest issue in India. Rising population increases the poverty in
India. According to United Nation's Millennium Development Goals (MDG) program 270
million or 21.9% people out of 1.2 billion of Indians lived below poverty line of $1.25 in
2011-2012. People have to spend a large portion of their resources for bringing up of their
wards. It results into less saving and low rate of capital formation. Hence improvement in
production technique becomes impossible. It means low productivity of labor.
9. Social Problems
Over-population give rise to various social problems. It leads to movement of people from
rural areas to the urban areas and causes the growth of slum areas. People live in most
unhygienic and insanitary conditions. Unemployment and poverty lead to frustration and
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anger among the educated youth. This leads to robbery, beggary, prostitution and murder
etc. The terrorist activities that we find today in various parts of the country are the
reflection of frustration among educated unemployed youth. Overcrowding, traffic
congestions, frequent accidents and pollution in big cities are the direct result of over-
population.
10. More Pressure on Land:

Due to excess population growth density of population in India is increasing very fast.
Rising rate of population growth exerts more pressure on land. On the one hand, per capita
availability of land goes on diminishing and on the other, the problem of sub-division and
fragmentation of holdings goes on increasing. More and more agriculture land comes under
the construction of industries, roads, cities and other infrastructure. Population explosion
leads to environmental degradation. Higher birth rate brings more pollution, more toxic
wastes and damage to biosphere. It adversely affects the economic development of the
country. Briefly speaking, population explosion hinders the economic development. It
should be controlled effectively.
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3.4 RELATIONSHIP BETWEEN POPULATION GROWTH AND

First, we will examine the effect of population growth on the economic development of a
country. On the one hand, through rapid population growth, there will be some economic
development. Further, the economy will also be controlled by a large population because a
large market has to be supplied. This market will attract the future industrialists who will utilize
the most technologically advanced methods to obtain the maximum yield out of the available
resources. In this manner the growing population will speed up the economic growth in a
country. For example, Japan can be cited as a country with a high population but it managed to
achieve a high living standard by developing the economy. But when we consider some
countries like India, it is clear that the growing population is a big problem that affects the
economic development of that country. In this case, the steadily growing population seems to
be a hindrance to the country’s economic development. We can also consider the effect of
economic development on population growth. In a country that has not yet attained satisfactory
economic development, the birth and death rates will be rather high. The birth rates will be
steep due to a number of factors such as the early marriage of women, more home centered
role with fewer working women due to social beliefs and customs, and the expectation that the
children will generate an income for their families someday. At the same time the death rate
will also be high due to the consumption of less nutritious food, poor sanitary conditions and
no availability of advanced medical facilities. But when a country enters an era of sound
economic development, more nutritious food will be consumed by the people and advanced
medical care will also improve the life expectancy of the people. Due to the medical advances,
ample supply of food items, and better sanitation brought forth by economic development there
will be a sharp drop in the death rate. But as a result of all the comforts made accessible by the
economy, the birth rate will continue to remain at a high level. The combined effect of all this
will be that the growth of population will speed up and there will be a less manageable situation
caused by the sharp rise in the number of people. However, when a country builds up a more
robust economy, the birth rate usually begins to decline. That happens because economic
progress makes people realize the appropriateness of having smaller families and also drives
them to take an interest in planning their families. The reason for this is economic growth is
always accompanied by a rise in prices and increase in the cost of living. Then children are
considered not as a treasure by parents but as a burden for them. The prevalence of small
families and low death rates are special characteristics of this period.
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3.5 IMPACT OF INDIA’S POPULATION GROWTH ON

POPULATION GROWTH AND ECONOMIC DEVELOPMENT
The consequences of population growth on economic development have attracted the attention
of economist ever since Adam Smith wrote in his “Wealth of Nations”. Adam Smith wrote,
“The annual labor of every nation is the fund which originally supplies it with all the
necessaries and conveniences of life”. It was only Malthus and Ricardo who created an alarm
about the effect of population growth on the economy. But their fears have proved unfounded
because population growth in Western Europe has led to its rapid industrialization. It is
sometimes said that a growing population helps in economic development by providing an
expanding markets for goods. But it is an erroneous view. Actually over-population retards
economic development. All efforts at economic development under fast growing population
turn out to be “Writing on sand with waves of population growth washing away all that we
have written”. Population growth hampers the economic development in many ways-
1. OVERUSE OF NATURAL RESOURCES-

Rapid population growth tends to overuse the country’s natural resources. This is
particularly the case where the majority of people are dependent on agriculture for their
livelihood. With rapidly increasing population, agricultural holding become smaller
and unremunerated to cultivate. There is no possibility of increasing farm production
through the use of new land. Consequently, many households continue to live in
poverty. In fact, the population of India has increased from 102.7 crores in 2001 to
121.01 crores in 2011 which leads to overuse of land, thereby endangering the welfare
of future generations.
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2. PER CAPITA INCOME

The effect of population growth on per capita income is unfavorable. The growth of
population tends to retard the per capita income in three ways-
• It increases the pressure of population on land.
• It leads to increase in costs of consumption goods because of the scarcity of the co-
operant factor to increase their supplies.
• It leads to a decline in the accumulation of capital because with increase in family
members, expenses increase. These adverse effects of population growth on per capita
income operate more severely if the percentage of children in total population is high.
Therefore a large number of children in the population entail a heavy burden on the
economy, because these children simply consume and don’t add to the national product.
3. AGRICULTURAL DEVELOPMENT
In under-developed countries like India, people mostly live in rural areas. Agriculture
is their main occupation. So with population growth the land man ratio is distributed.
Pressure of population on land rises because land supply is inelastic. It adds to disguised
unemployment and reduces per capita productivity further. As the number of landless
worker increases, their wages fall. Thus, low per capita, productivity reduces the
propensity to save and invest. As a result the use of improved technology and other
improvements on land are not possible. Capital formation in agriculture suffers and the
economy is bogged down to the subsistence level. The problem of feeding growing
population becomes serious due to acute shortage of food products. These have to be
imported which raises balance of payments difficulties. Thus, the growth of population
retards agricultural development.
4. CAPITAL FORMATION
Growth of population retards capital formation. As population increases, per capita
available income declines. People are required to feed more children with the same
income. It means more expenditure on consumption and a further fall in already low
savings and consequently in the level of investment. Further, a rapidly growing
population by losing incomes, savings and investment compels the people to use a low
level o-f technology which further retards capital formation.
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5. EMPLOYMENTA
Rapidly increasing population plunges the economy into mass unemployment and
under-employment. As population increases, the proportion of workers to total
population rises. But in the absence of complementary resources, it is not possible to
expand jobs. The result is that with the rise in labor force, unemployment and under-
employment increases. A rapidly increasing population reduces income, savings and
investment. Thus, capital formation is retarded and job opportunities are reduced,
thereby increasing unemployment. Moreover, as the labor force increases in relation to
land, capital and other resources, complementary factors available per workers decline.
As a result, unemployment increases. India has a backlog of unemployment which
keeps on growing with a rapidly increasing population. This tends to increase the level
of unemployment manifold as compared with actual increase in labor force.
6. ENVIRONMENT
Rapid population growth leads to environmental damage. Scarcity of land due to rapidly
increasing population pushes large number of people to ecologically sensitive areas
such as hillsides and tropical forests. It leads to over grazing and cutting of forests for
cultivation leading to severe environmental damage. Moreover, the pressure of rapid
growth of population forces people to obtain more food for themselves and their
livestock. As a result, they over-cultivate the semi-arid areas. This leads to
desertification over the long run when land stops yielding anything. Besides, rapid
population growth leads to migration of large numbers to urban areas with
industrialization. This results in severe air, water and noise pollution in cities and town.
7. SOCIAL INFRASTRUCTURE
Rapidly growing population necessitates large investments in social infrastructure and
diverts resources from directly productive assets. Due to scarcity of resources, it is not
possible to provide educational, health, medical, transport and housing facilities to the
entire population. There is over-crowding everywhere. As a result, the quality of these
services goes down. To provide these social infrastructures requires huge investment.
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3.6 POPULATION DYNAMICS IN INDIA AND IMPLICATIONS

FOR ECONOMIC GROWTH
The world experienced dramatic population growth during the twentieth century, with the
number of inhabitants doubling from 3 to 6 billion between 1960 and 2000. India, too, saw
very rapid population growth during this period – from 448 million to 1.04 billion – and to 1.21
billion in 2010. The effects of past and projected future demographic change on economic
growth in India is the main focus of this chapter. Figure 1 plots world population from 1950 to
2050, and shows the share of world population attributable to India; post-2010 data are United
Nations (UN) projections.
Global population grew at roughly 2% per annum from 1960-2000, a level that is unsustainable
in the long term, as it translates into population doubling every 35 years. India’s population is
currently growing at a rate of 1.4% per year, far surpassing China’s rate of 0.7%. The
differential between India and China will result in India surpassing China with respect to
population size in less than 20 years.
While a cause for concern, global population growth has not met Malthus’ pessimistic
predictions of human misery and mass mortality. During the past few decades, rapid population
growth has been accompanied by an unparalleled decline in mortality rates and by an increase
in income per capita, both globally and in India.
This chapter reviews the size, growth, and structure of India’s population in historic and
comparative perspective. The main emphasis is on features of India’s demography that have
22
been, and will likely be, relevant to economic growth and the improvement of living standards.
Section 1 analyzes UN data on population dynamics in India, covering fertility, mortality,
migration, and age structure. This section also provides a non-technical introduction to the
salience of demographic patterns and trends for macroeconomic performance. Section 2
reviews theoretical and empirical literature on the effect of demographics on labor supply,
savings, and economic growth and explores the application of the models and results in this
literature to understanding and forecasting economic growth in India. Section 3 examines
India’s economic prospects through a demographic lens and discusses policy issues related to
the realization of alternative demographic scenarios and to capturing the economic potential
they create.
Section 1: Demographic change and economic growth
During the past decade, there have been two significant breakthroughs regarding the impact of
demographics on national economic performance. The first has to do with the effect of the
changing age structure of a population. The second relates to population health.
Section 1.1: Age structure and some cross-country evidence
The age structure of a population can have a large effect on economic growth, especially when
it shifts as a result of baby booms and busts and their echo effects.
Demographers use the “demographic transition” as a starting point for explaining this effect.
The demographic transition refers to the nearly ubiquitous change countries undergo from a
regime of high fertility and high mortality to one of low fertility and low mortality. As this
phenomenon tends to occur in an asynchronous fashion, with death rates declining first and
birth rates following later, countries often experience a transitional period of rapid population
growth. This period has traditionally been the main focus of economists interested in
demographics.
But population growth is not the only major consequence of the demographic transition. The
age structure is also transformed. This happens initially as a consequence of a baby boom that
occurs at the beginning of the transition. The baby boom is not caused by an increase in births,
but rather by the sharply reduced rates of infant and child mortality that are characteristic of
the beginning of a demographic transition, mainly due to increased access to vaccines,
antibiotics, safe water, and sanitation. This type of baby boom starts with higher survival rates
23
and abates when fertility subsequently declines as couples recognize that fewer births are
needed to reach their targets for surviving children, and as those targets are moderated.
Baby booms are very consequential economically, because the presence of more children
requires that there be more resources for food, clothing, housing, medical care, and schooling.
Those resources must be diverted from other uses such as building factories, establishing
infrastructure, and investing in research and development. This diversion of resources to
current consumption can temporarily slow the process of economic growth. Of course, babies
born in such a boom will invariably reach working ages within a period of 15-25 years. When
this happens, the productive capacity of the economy expands on a per capita basis and a
demographic dividend may be within reach.
Demographic dividends are a composite of five distinct forces: The first is the swelling of the
labor force as the baby boomers reach working age. The second is the ability to divert social
resources from investing in children to investing in physical capital, job training, and
technological progress. The third is the rise in women’s workforce activity that naturally
accompanies a decline in fertility. The fourth has to do with the fact that the working ages also
happen to be the prime years for savings, which is key to the accumulation of physical and
human capital and technological innovation. And the fifth is the further boost to savings that
occurs as the incentive to save for longer periods of retirement increases with greater longevity.
When analyzing the chart above from a purely economic perspective, the bar on the left can be
termed “the East Asian miracle,” a moniker chosen by the World Bank in the mid-1990s to
describe a phenomenon that seemed to defy explanation. Never before had such a large group
of countries experienced such rapid growth in average incomes for such a long period of time.
Within this period, East Asian gross domestic product (GDP) per capita grew at an annual
average rate of 6.4%, from $212 to $1,475. In contrast, Sub-Saharan Africa experienced
essentially zero growth, with average per capita GDP growth falling at an annual average rate
of -0.2%, from $587 to $578.
Approaching this puzzle from a demographic perspective reveals some of the causes
underlying the dramatic differences in growth between East Asia and Sub-Saharan Africa.
Figure 3 plots the ratio of the working-age to the non-working age population in both regions,
where the working age population is defined as the population aged 15-64, and the non-
working-age population (for simplicity, “dependents”) is defined as the population under age
15 or aged 65 and over.
24
This chart illustrates several critical points. First, the ratio of working-age people to dependents
has been lower in Sub-Saharan Africa than in East Asia throughout the entire period shown.
This means that East Asia has had higher numbers of people in the prime years for working
and saving. The difference between the two lines is primarily a reflection of a relatively high
burden of youth dependency in Sub-Saharan Africa, due to its long history of high fertility. By
contrast, East Asia, with a precipitous decline in fertility, experienced the most rapid
demographic transition in history. Today, East Asia has more than 2.3 workers for every non-
worker, dwarfing Sub-Saharan Africa’s 1.2 workers per non-worker. This difference translates
into households having an entire extra worker for every non-worker, which in turn results in a
commensurately large increase in income per household, ultimately aggregating upward to
increased country level growth.
Fertility decline lowers youth dependency immediately, but does not appreciably affect the
working-age population for 20-25 years. But when the working-age population does increase
as a share of the total population, there is an opportunity for economic growth. Figure 3
suggests that the superior economic performance of East Asia since the mid-1970s is related to
East Asia’s demographics.
Indeed, using rigorous theoretical and statistical tools and appropriate data,2 economists have
spent the past decade garnering evidence that East Asia’s rapid economic growth was spurred
by its demographic transition, during which East Asia’s age structure has evolved in a way that
25
has been highly favorable for economic growth. The resulting body of work suggests that
demographic change accounts for approximately 2 percentage points of the growth rate of
income per capita in East Asia, representing one-third of the supposed miracle. Labeling the
economic growth East Asia as a miracle, therefore, was partly a reflection of a failure to
consider the implications of demographics.
However, demography is not destiny; growth of the working-age share of the population does
not automatically lead to an acceleration of economic growth. Demographic change may
provide a boost to economic growth, but appropriate policies are needed to allow this to happen.
Without such policies, a country may instead find itself with large numbers of unemployed or
underemployed working-age individuals. This scenario would be a “demographic disaster”,
instead of a demographic dividend, in some instances promoting state fragility and failure,
potentially with adverse political, social, economic, and ecological spillovers to other countries.
Section 1.2: Population health
The second significant breakthrough in thinking is often summarized by the phrase “healthier
means wealthier.” In other words, health and longevity are very consequential for economic
performance. Although macroeconomists and economic policymakers have traditionally
viewed population health as a social indicator that improves only after countries become
wealthy, new thinking views health itself as an instrument of economic growth, not simply a
consequence of it.
Health is believed to drive economic growth for four main reasons. First, a healthier workforce
is a more productive workforce. Second, healthier children tend to have better records of school
attendance, and stay in school longer, ultimately resulting in a more educated workforce.
Healthy children also have better cognitive function, and avoid physical and mental disabilities
that may be associated with childhood illness. Third, healthy populations have higher savings
rates, as people save more in anticipation of longer lives post-retirement. And finally, healthy
populations attract foreign direct investment. In recent years, analyses of the proposition that
“healthier means wealthier” have abounded, with the vast majority of them concluding that
health is a strong driver of economic growth.
Recent 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
26
point of annual growth of income per capita. This 1 percent is significant in the context of a
world economy in which per capita income typically grows at 2-3 percent per year. This
potential 1 percentage point gain is also meaningful, as a 10-year gain in life expectancy is well
within the reach of many countries. This gain corresponds roughly with the gap between India
– where life expectancy is currently about 64 years – and today’s developed countries, currently
at 78 years. It also corresponds roughly to the magnitude of the increase in life expectancy that
many demographers project for developed countries in the next four to seven decades.
Researchers have also focused on the central importance of health in the alleviation of poverty:
the main asset poor people possess is their labor, and the value of that asset is crucially
determined by their health. This explains why health figures so prominently in plans to halve
the global poverty rate, which has emerged as the central imperative of the entire global
development community.
Section 1.3: Key facts about India’s population
In the past, India’s population has grown very rapidly and has imposed a substantial burden of
youth dependency on the Indian economy. But in recent years, India’s demographic profile has
begun to evolve in a way that is potentially more favorable to economic growth.
Figure 4 plots several aspects of India’s demographic profile over time, revealing significant
improvements in basic health indicators. The interplay of these mortality and fertility changes
implies sizable changes in the age structure of India’s population. Since 1950, India has
experienced a 70% decline in the infant mortality rate, from over 165 deaths per thousand live
births in the 1950s to around 50 today. India’s child (i.e., under age 5) mortality rate has fallen
from 138 deaths per thousand in the early 1980s to 75 today. Life expectancy has increased at
an average pace of 4.5 years per decade since 1950. The fertility rate has declined sharply from
approximately 6 children per woman in the 1950s to 2.7 children per woman today. Figure 4
shows three trends that fertility may follow in the future, based on the assumptions the United
Nations makes in publishing low-, medium-, and high-fertility scenarios. The population
growth rate, after peaking in the late 1970s at about 2.3% per year, has fallen to 1.4% in 2010.
In spite of the decline in fertility and the population growth rate, India’s population is still
projected to increase (based on the UN’s medium-fertility scenario) from about 1.2 billion
today to an estimated 1.6 billion by 2050 due to population momentum (i.e., the large cohort
of women of reproductive age will fuel population growth over the next generation, even if
27
each woman has fewer children than previous generations did). Finally, the decline of crude
birth and death rates shows that India is well along in its demographic transition.
The sex ratio at birth in India is 1.12 males for each female – one of the highest ratios in the
world. The corresponding figure for 2003 was 1.05 (United States Central Intelligence Agency,
2010). Sex-selective abortions, although illegal, are thought to be a prime reason for this high
ratio. Indian families have long shown favoritism toward boys, and new technologies are
allowing that preference to be expressed in differential birth rates.
28
As in virtually all countries, life expectancy at birth in India also differs by sex. In the period
2005-2010, female life expectancy was 65.0 years, and male life expectancy was 62.1 years –
very similar to the differences that are seen in developing countries as a whole and in the world.
However, India differs from the world and from developing countries as a whole in the manner
in which sex differences in life expectancy have evolved since 1950. In most countries, women
lived longer than men in 1950, whereas in India female life expectancy, at 37.1 years, was 1.6
years less than that of men. This differential has reversed in the intervening years.
India’s demographic changes are also manifest in its age structure. The population pyramids of
Figure 5 show the share of population in each age group, separately for males and females. In
1950, India had a very young population, with many children and few elderly; this gave India’s
age distribution a pyramidal shape. Moving forward in time, the base of the population pyramid
shrinks as the number of working-age individual’s increases relative to children and the elderly.
Figure 6 shows an alternative representation of the changing age structure of India’s

population: the ratio of the number of working-age Indians to the number of non-working-age
Indians under three UN fertility scenarios.3 The graph also plots the ratio for East Asia, for
comparison.
The ratio of working-age to non-working-age people in India mirrored the corresponding ratio
in East Asia from 1950 to 1975. Since then, it has been lower than that of East Asia –
corresponding to a higher burden of youth dependency. Indeed, India’s demographic cycle now
29
lags roughly 25 years behind that of East Asia. A purely demographic perspective suggests that
the next three decades will be a period of catching up for India with respect to per capita income
in East Asia.
While these fertility scenarios have very different implications for the future age structure of
India’s population, all three suggest further growth in the working-age share. Under the low
fertility scenario, according to which the total fertility rate will drop to 1.4 by 2030, India is
expected to reach a higher working-age ratio than ever seen in East Asia. The medium scenario
shows India reaching a ratio nearly as high as East Asia’s high point, and the high scenario
shows a very modest increase over today’s ratio in India. In sum, the medium- and low-fertility
scenarios bode well with respect to India’s potential for realizing a sizable demographic
dividend, representing what could amount to an additional percentage point or more of per
capita income growth, compounded year after year. This is not an insignificant amount, given
that the annual rate of growth of India’s real income per capita averaged a little over 4% during
the past three decades (World Bank, 2010).
As an aside, it should be noted that India’s demographic indicators are similar to those of the
South Asian region as a whole. Compared with the two other large South Asian countries, it is
ahead of Pakistan in the demographic transition, but behind Bangladesh.
An additional demographic fact deserves mention: there are an estimated 11.4 million Indians
living outside of India. The countries to which Indians have emigrated in largest numbers, as
of 2010, are United Arab Emirates (2.2 million), the United States (1.7 million), Saudi Arabia
(1.5 million), and Bangladesh (1.1 million). In 2000, 57,000 Indian physicians were living
overseas.
In 2010, Indian emigrants are estimated to be sending home remittances totaling $55 billion,
the most of any country, constituting about 4.5% of GDP. (Ratha, Mohapatra, and Silwal, 2011)
The number of Indian immigrants in the United States has grown rapidly in recent years (there
were 1.0 million in 2000). Their median age is 37, and just over half are female. Nearly three-
quarters have at least a bachelor’s degree, and nearly half work in professional occupations.
Mean personal income (in 2008 dollars) is $53,000, and median household income is $92,000.
(United States Bureau of the Census, International Data Base (2008 midyear estimates). As
political, economic, and social conditions change over time in India and its neighbors, the
number of migrants, the skills they take to other countries, and the value of the remittances
they send may change significantly.
30
One final point: the demographic indicators presented here apply to India as a whole. Section
3, below, discusses the extent of demographic heterogeneity across Indian states, and some
implications of that heterogeneity.
Section 2: Review of technical literature
Economists have devised a number of distinct approaches to studying the determinants of

economic growth. For example, Bloom and Freeman (1986) and Bloom, Canning, et al. (2009)
employ a simple shift-share analysis to decompose the growth of income per worker into a
portion attributable to the reallocation of labor from low- to high-productivity sectors and a
portion attributable to the growth of labor productivity within sectors. An alternative and more
sophisticated approach is to calibrate a production function using parameters estimated from
micro data.
This section focuses on estimates based on yet another common approach that makes use of
cross-country panel data to estimate the parameters of an empirical growth model. This
approach assumes that fundamental influences on economic growth such as education,
geography, and demographics can be measured, and that non-measured influences such as
weather fluctuations and economic shocks are adequately reflected in a random error term. The
approach also assumes a degree of cross-country commonality in the fundamental determinants
of economic growth.
This regression-based approach lends itself naturally to an examination of the influence on

growth of a range of demographic, economic, geographic, institutional, and policy variables.
The demographic factors emphasized herein are mortality, fertility, age structure, and
population growth.
Mortality is typically measured using life expectancy, and is hypothesized to have a number of
potential economic effects. First, insofar as mortality is a proxy for population health, it is
presumed to affect labor quality and productivity. Gains in life expectancy are thus expected
to promote higher GDP per worker. Along these lines, Fogel (1994) researches the contribution
of health and nutrition improvements to the Industrial Revolution. Bloom, Canning, and Sevilla
(2004) estimate a sizable effect of health as a form of human capital in a production
functionbased cross-country study of economic growth rates.4 Bhargava et al. (2001) and
Bleakley (2003 and 2006) reach similar conclusions based on different empirical analyses.
These conclusions on the positive effect of health on economic growth are not supported by
Acemoglu and Johnson (2007), but they are supported by reanalysis of the Acemoglu and
31
Johnson data by Bloom, Canning, and Fink (2009), Bleakley (forthcoming 2010), and Aghion
et al. (2009). Second, increased longevity can lead to increased savings for longer expected
periods of retirement (Bloom, Canning, and Graham (2003); Bloom, Canning, Mansfield, and
Moore (2006)), higher rates of foreign direct investment (Alsan, Bloom, and Canning (2006)),
and higher rates of domestic investment, savings, and school enrollment (Lorentzen, McMillan,
and Wacziarg (2005)).
As discussed above, fertility typically declines after a fall in mortality. As a result of the
asynchronous nature of the changes in mortality and fertility, the rate of population growth
tends to increase and then decrease over the course of the demographic transition. In addition,
changes in the age structure take place as a "bulge" generation makes its way through the
population pyramid. In general, when relatively large generations reach the prime ages for
working and saving, a country will experience a demographically induced economic boost,
provided the generation is productively employed.
Bloom and Williamson (1998), Bloom, Canning, and Malaney (2000), Bloom and Canning
(2003 and 2008), and Mason (2001) have investigated the nature and magnitude of this
contribution of age structure to economic growth (i.e., the “demographic dividend”). For
example, as discussed earlier, East Asia’s demographic transition is predictive of its trajectory
of income per capita (Bloom and Williamson (1998), Bloom, Canning, and Malaney (2000),
Bloom and Finlay (2009)). Demographic change also helps account for a large portion of
Ireland’s economic miracle of the 1990s (Bloom and Canning, 2003), whereas the sluggishness
of Africa’s fertility transition helps explain its chronically poor macroeconomic performance
(Bloom, Canning, and Sevilla (2003); Bloom and Sachs (1998); Bloom, Canning, Fink, and
Finlay (2007); Bloom, Canning, Fink, and Finlay (2010)). The results of these analyses are
inconsistent with the view that factors idiosyncratic to East Asia or Sub-Saharan Africa account
for their different profiles of economic growth. These regions appear to obey common
principles of economic growth once age structure dynamics are introduced into the economic
growth model (Bloom, Canning, and Malaney (2000); Bloom and Canning, (2008), Bloom,
Canning, Fink, and Finlay (2010)). Other interesting empirical treatments of the effect of age
structure dynamics on economic growth include Crenshaw, Ameen, and Christenson (1997)
and de la Croix, Lindh, and Malmberg (2007).
32
The literature in this area also makes clear that there is nothing automatic about the effects of
demographic change on economic growth (i.e., that “demography is not destiny” (Bloom,
Canning, and Sevilla (2003), Bloom and Canning (2003), Bloom and Canning (2008)).
Changes in age structure simply affect the supply-side potential for economic growth.
Capturing that potential depends on numerous other factors such as governance,
macroeconomic management, the depth and efficiency of financial markets, and policy in the
areas of trade, education, health, and labor.
Section 3: India’s economic prospects
Demographic realities may help Indian policymakers adopt measures that can accelerate
India’s demographic transition and magnify India’s demographic dividend. Alternatively, India
could experience a demographic drag on its economy if the country falls prey to potential
demographic threats to its economy.
Policymakers may also consider three demographic- and health-related potential threats to
India’s future prosperity: population aging, population heterogeneity, and the effects of
urbanization on health.
Section 3.1 Population aging
Today’s large cohorts of working-age individuals will be large cohorts of elderly dependents
in the future. Figure 9 shows that the share of India’s 50+ population today is relatively small,
accounting for only 16% of India’s population. Going forward however, India will witness
rapid growth among this age group. By 2050, over 33%, or roughly 536 million people, will
be aged 50 or over; the share of those aged 65 and over will increase from 5% to 14%; and the
share of those aged 80 and over will rise from 1% to 3%. The main force driving India’s
changing age structure are the maturing of past birth cohorts, upward trends in life expectancy
due to increasing survival rates at older ages, and falling fertility.
33
There has been significant inquiry into the population aging phenomenon, especially
concerning its implications for economic growth. Much of the existing commentary contains
alarmist tones, with concern expressed that many countries will be flooded with elderly
individuals who will endeavor to consume more than they contribute, leading to dramatically
altered asset values and income trajectories.
However, India’s 65 and over population currently represents only one-fourth the number of
its adolescents and young adults, and will not come to outnumber the younger group for nearly
four decades. Enacting policies to meet the education and training needs of India’s youth can
ease the process of caring for growing numbers of older Indians in the future. While it is true
that adult labor force participation rates will eventually decrease as the population ages, the
burden of old age dependency will be substantially offset by the decline in youth dependency
associated with declining fertility. In addition, behavioral and policy responses to population
aging – including higher labor force participation of women, higher savings for retirement, and
later age of retirement – suggest that population aging will not necessarily significantly impede
economic growth.
Notwithstanding its likely modest effect on economic growth in India in the coming decades,
population aging is creating a significant challenge for India, given its current reliance on
private family networks to provide the elderly with care, companionship, and financial support.
That system will not be able to withstand the increased number of older Indians, especially
given increased female labor force participation, smaller numbers of more mobile children,
widening generation gaps, and increasing burdens of costly-to-treat non-communicable disease
such as diabetes, cancer, and stroke.
34
There is currently a vacuum with respect to institutions and policies to address these challenges
in India; less than 10% of the Indian population currently has health insurance (either public or
private) and 90% of the elderly have no pension. India will likely benefit from building an
evidence base of high-quality data on population aging, and using it to devise a related set of
public institutions (see Lee 2010).
Section 3.2: Population heterogeneity
A second potential threat to India’s future prosperity is the reality that India encompasses
numerous sources of powerful heterogeneity in the form of culture, education, income,
language, religion, and social status, among others. India is a particularly heterogeneous
country demographically, with most demographic indicators varying enormously across states.
For example, Figure 10 shows cross-state differences (for the year 2001) in the main indicator
of potential for a demographic dividend, namely, the ratio of the working-age population to the
non-working-age population. Here, the comparison of Tamil Nadu and Bihar shows as great a
disparity as the current difference between Ireland and Rwanda – giving the economy of Tamil
Nadu a much larger potential demographic lift than that of Bihar.
Other demographic indicators show a similarly large range of heterogeneity. For example, the
total fertility rate (TFR) varied across the states of India by a factor of more than 3 in 2001.
35
Fertility in Kerala was well below the long-run replacement level of 2.1 children per woman,
whereas it was more than twice the replacement level in Uttar Pradesh; this disparity
corresponds roughly to the current difference in fertility between Japan and Kenya. India’s
states also exhibit a large variation in life expectancy, with a range from 73 years in Kerala to
59 years in Madhya Pradesh.
While heterogeneity can be a source of constructive synergy, it can also cause or contribute to
social and political unrest and instability, particularly when it is accompanied by economic
inequality. Moreover, insofar as demographic cycles induce economic cycles, the extraordinary
degree of demographic heterogeneity within India suggests economic trajectories that are as
different as those seen above between East Asia and Sub-Saharan Africa. Although it hardly
represents decisive evidence on this point, it is worth noting that, within India, the cross-state
correlation between the ratio of the working-age to the non-working-age population and
income per capita was +0.64 in 2001. Duraisamy and Mahal (2005) examine India’s cross-state
heterogeneity and find “a strong association between per capita income and health status . . .
of the population.” Their econometric analysis finds that health status and economic growth
affect each other: “a 10% increase in per capita income is required to increase [life expectancy
at birth] by about 2%”; they also find that the effect of life expectancy on the net domestic
product for Indian states is “much higher than the effect of the conventional inputs of capital
and labor.” It is critical for researchers and policymakers to consider demographic differences
within India, as differences in economic growth rates by state could exacerbate inequality and
political frictions within India.
Section 3.3: Urbanization and health
India, like virtually every country in the world, is becoming more urbanized: the fraction of
people living in urban areas grew from 18% in 1960 to 30% in 2008 (World Bank 2010).
During this period, it has been confronting a surge in chronic diseases – accounting for 53% of
all deaths in India in 2005 (Reddy et al 2005) – that are related to a decline of infectious disease
mortality, tobacco consumption, patterns of nutrition, and urban living and a more sedentary
lifestyle. People living in cities are typically exposed to greater pollution levels than rural
dwellers. They often have more sedentary lives, and they may be subject to more stress. Some
chronic illnesses, such as hypertension and diabetes, tend to be positively correlated with
wealth (and hence with urban living), whereas others, such as anemia, tend to be negatively
36
correlated. Left unchecked, the increased prevalence of chronic diseases will pose serious
threats for India’s future economic and physical well-being.
Despite urbanization’s negative effects on health and the possible follow-on effects that poorer
population health can have on economic growth, there are clearly other aspects of urbanization
that may promote economic growth. In general, work opportunities are more plentiful, fertility
rates are lower so more women enter the labor force, industries can capture the benefits of
economies of scale, enterprises can readily learn from each other, and transportation of people
and goods is easier than in rural areas. Even in the arena of health, greater availability of
healthcare, combined with lower fertility rates, means that increased urbanization may offer
some advantages that can help propel economic growth. However, based on a cross-country
analysis during 1970-2000, Bloom, Canning, and Fink (2008) find no effect of urban share on
economic growth.
Section 3.4: Capturing India’s economic potential
India is poised to reap economic benefits from the favorable demographics discussed earlier,
but this windfall is not guaranteed. India has several opportunities to increase its chances of
success, the first being to make wider and deeper investments in health. Insofar as investing in
health can help stimulate development, India has considerable potential to promote higher
income through programmatic and financial commitments to health. India has taken a
significant step in this direction by establishing the Public Health Foundation of India and the
National Rural Health Mission, which seek to fill India’s pressing need for a wide range of
further investments in the promotion and protection of health, including the training and wide
deployment of medical and public health professionals who focus on disease prevention,
treatment, and care.
India’s second great demographic opportunity involves the acceleration of fertility decline. In
general, there are three main approaches to promoting fertility decline, and India has scope for
improvement with respect all three. The first is the expansion of family planning services in a
way that is respectful of people’s reproductive rights. Currently, approximately 13% of Indian
women (10% in urban areas and nearly 15% in rural areas) report unmet need for contraception,
meaning that many currently married women who desire to postpone or forego childbearing
are not using contraception. Overall, 56% of married women in India (64% in urban areas and
53% in rural areas) report that they use contraception (either modern or traditional methods),
with female sterilization by far the most common method. (Government of India, 2005-2006)
37
Satisfying India’s unmet need for contraception will help it achieve its stated goal of bringing
TFR down from its current level of 2.7 to the long-run replacement fertility level of 2.1.
A second proven approach to lowering fertility involves efforts to promote infant and child
survival. Vaccines against childhood disease are one potent way to realize an improvement in
child survival, which leads to more than proportionate fertility reductions. Such an approach
might include expanding coverage of established and inexpensive vaccinations such as those
against diphtheria, tetanus, pertussis, polio, and measles; or it might include introducing a new
schedule of more expensive vaccinations against rotavirus, pneumococcal disease, and
Haemophilus influenzae type b (Hib), thereby addressing several leading causes of child death
in India.
Childhood vaccines also have the virtue of promoting better school attendance, better cognitive
function, and better adult health, all of which tend to make vaccinated children more
productive, and therefore higher-earning, adults. India stands to benefit greatly from initiatives
to increase vaccination coverage; its coverage rates are currently well below world averages.
DTP3 vaccination rates are a common indicator of national immunization coverage; the
coverage rate for India was 66% in 2008, nearly 20 percentage points lower than for the rest of
the world (WHO 2010).
Third, girls’ education can serve as both an indicator of development and an instrument for
promoting fertility decline. Educated mothers tend to have fewer children, as education raises
the cost of having children by improving the work opportunities that most women are forced
to forgo by having children. Education also empowers women to express their views on
lifestyle and fertility decisions. Having fewer children allows families to invest more in the
health and education of each child, thereby raising the productive capacity of future
generations. The effects of education, and girls’ education in particular, are extremely
powerful. Education also has a major role to play in India’s ability to capitalize on the
demographic dividend: education, especially secondary and tertiary education, will equip
India’s youth with the skills they need to be productive in a fast-moving and unforgiving global
economy in which knowledge and skill rule.
Although India has made progress since the early 1990s, there is considerable scope for
continued progress in this area, mainly at the secondary and tertiary levels. At the same time,
policymakers must ensure that they are not misled by statistics, as enrollment in school does
not guarantee attendance. Furthermore, attendance does not guarantee that a student is
38
receiving an education of sufficiently high quality to substantially augment their knowledge,

skills, and productivity. In Chapter 13 of this volume, Anjini Kochar examines the challenges
facing the Indian primary and secondary education systems and efforts to overcome those
challenges. In Chapter 14 Shyam Sunder addresses similar issues in the realm of higher
education.
Indian policymakers will also need to recognize that realization of the demographic dividend
depends on an economy’s capacity to absorb workers into productive employment. This
capacity is strengthened by:
• good governance (effective avenues for citizen input, well-functioning institutions, respect
for the rule of law, low level of corruption, respect for property rights, sanctity of contracts);
• 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 severe trade imbalances);
• well-developed and competitive financial markets (institutions that facilitate mobilization of

savings, safeguards to ensure that banks and other financial institutions serve the public
interest) and labor markets (a negotiated balance of power between employers and workers);
and above all,
• 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 to keep up with new types of
services and industries).
While these are all excellent policies independently of demographics, the stakes are much
greater when a large cohort is poised to enter the working ages. Given its high levels of internal
heterogeneity, India needs to consider a combination of these approaches and policies to
catalyze and speed its demographic transition, and to capture a demographic dividend.
For example, some Indian states are in a much better position than others to benefit from
demographic change. In some of the poorest states, such as Bihar and Uttar Pradesh, a large
portion of the young population is extremely poorly educated and cannot engage productively
in the type of work that would provide them a good income and that would help propel India
39
forward economically. For that reason, even as these states experience falling fertility rates and
consequently a rising share of working-age people, they are not poised to capture a
demographic dividend.
40
3.7 POPULATION SIZE AND PER CAPITA IMPACT
In an agricultural or technological society, each human individual has a negative impact on his
environment. He is responsible for some of the simplification (and resulting destabilization) of
ecological systems which results from the practice of agriculture (3). He also participates in the
utilization of renewable and nonrenewable resources. The total negative impact of such a
society on the environment can be expressed, in the simplest terms, by the relation
I=P•F
Where P is the population, and F is a function which measures the per capita impact. A great
deal of complexity is subsumed in this simple relation, however. For example, F increases with
per capita consumption if technology is held constant, but may decrease in some cases if more
benign technologies are introduced in the provision of a constant level of consumption. (We
shall see in connection with theorem 5 that there are limits to the improvements one should
anticipate from such “technological fixes.’’)
Pitfalls abound in the interpretation of manifest increases in the total impact I. For instance, it
is easy to mistake changes in the composition of resource demand or environmental impact for
absolute per capita increases, and thus to underestimate the role of the population multiplier.
Moreover, it is often assumed that population size and per capita impact are independent
variables, when in fact they are not. Consider, for example, the recent article by Coale (1), in
which he disparages the role of U.S. population growth in environmental problems by noting
that since 1940 “population has increased by 50 percent, but per capita use of electricity has
been multiplied several times.” This argument contains both the fallacies to which we have just
referred.
First, a closer examination of very rapid increases in many kinds of consumption shows that
these changes reflect a shift among alternatives within a larger (and much more slowly
growing) category. Thus the 760 percent increase in electricity consumption from 1940 to 1969
(4) occurred in large part because the electrical component of the energy budget was (and is)
increasing much faster than the budget itself. (Electricity comprised 12 percent of the U.S.
energy consumption in 1940 versus 22 percent today.) The total energy use, a more important
figure than its electrical component in terms of resources and the environment, increased much
less dramatically—140 percent from 1940 to 1969. Under the simplest assumption (that is, that
a given increase in population size accounts for an exactly proportional increase in
41
consumption), this would mean that 38 percent of the increase in energy use during this period
is explained by population growth (the actual population increase from 1940 to 1969 was 53
percent). Similar considerations reveal the imprudence of citing, say, aluminum consumption
to show that population growth is an “unimportant” factor in resource use. Certainly, aluminum
consumption has swelled by over 1400 percent since 1940, but much of the increase has been
due to the substitution of aluminum for steel in many applications. Thus a fairer measure is
combined consumption of aluminum and steel, which has risen only 117 percent since 1940.
Again, under the simplest assumption, population growth accounts for 45 percent of the
increase.
The “simplest assumption” is not valid, however, and this is the second flaw in Coale’s example
(and in his thesis). In short, he has failed to recognize that per capita consumption of energy
and resources, and the associated per capita impact on the environment, are themselves
functions of the population size. Our previous equation is more accurately written
I = P • F (P)
displaying the fact that impact can increase faster than linearly with population. Of course,
whether F (P) is an increasing or decreasing function of P depends in part on whether
diminishing returns or economies of scale are dominant in the activities of importance. In
populous, industrial nations such as the United States, most economies of scale are already
being exploited; we are on the diminishing returns part of most of the important curves,
As one example of diminishing returns, consider the problem of providing nonrenewable
resources such as minerals and fossil fuels to a growing population, even at fixed levels of per
capita consumption, As the richest supplies of these resources and those nearest to centers of
use are consumed, we are obliged to use lower-grade ores, drill deeper, and extend our supply
networks. All these activities increase our per capita use of energy and our per capita impact
on the environment. In the case of partly renewable resources such as water (which is
effectively nonrenewable when groundwater supplies are mined at rates far exceeding natural
recharge), per capita costs and environmental impact escalate dramatically when the human
population demands more than is locally available. Here the loss of free-flowing rivers and
other economic, esthetic, and ecological costs of massive water-movement projects represent
increased per capita diseconomies directly stimulated by population growth.
Diminishing returns are also operative in increasing food production to meet the needs of
growing populations. Typically, attempts are made both to overproduce on land already farmed
42
and to extend agriculture to marginal land. The former requires disproportionate energy use in
obtaining and distributing water, fertilizer, and pesticides. The latter also increases per capita
energy use, since the amount of energy invested per unit yield increases as less desirable land
is cultivated. Similarly, as the richest fisheries stocks are depleted, the yield per unit effort
drops, and more and more energy per capita is required to maintain the supply (5). Once a stock
is depleted it may not recover—it may be nonrenewable.
Population size influences per capita impact in ways other than diminishing returns. As one
example, consider the oversimplified but instructive situation in which each person in the
population has links with every other person—roads, telephone lines, and so forth. These links
involve energy and materials in their construction and use. Since the number of links increases
much more rapidly than the number of people (6), so does the per capita consumption
associated with the links.
Other factors may cause much steeper positive slopes in the per capita impact function, F(P).
One phenomenon is the threshold effect. Below a certain level of pollution trees will survive
in smog. But, at some point, when a small increment in population produces a small increment
in smog, living trees become dead trees. Five hundred people may be able to live around a lake
and dump their raw sewage into the lake, and the natural systems of the lake will be able to
break down the sewage and keep the lake from undergoing rapid ecological change. Five
hundred and five people may overload the system and result in a “polluted” or eutrophic lake.
Another phenomenon capable of causing near-discontinuities is the synergism. For instance,
as cities push out into farmland, air pollution increasingly becomes a mixture of agricultural
chemicals with power plant and automobile effluents. Sulfur dioxide from the city paralyzes
the cleaning mechanisms of the lungs, thus increasing the residence time of potential
carcinogens in the agricultural chemicals. The joint effect may be much more than the sum of
the individual effects. Investigation of synergistic effects is one of the most neglected areas of
environmental evaluation.
Not only is there a connection between population size and per capita damage to the
environment, but the cost of maintaining environmental quality at a given level escalates
disproportionately as population size increases. This effect occurs in part because costs increase
very rapidly as one tries to reduce contaminants per unit volume of effluent to lower and lower
levels (diminishing returns again!). Consider municipal sewage, for example. The cost of
removing 80 to 90 percent of the biochemical and chemical oxygen demand, 90 percent of the
43
suspended solids, and 60 percent of the resistant organic material by means of secondary
treatment is about 8 cents per 1000 gallons (3785 liters) in a large plant (7). But if the volume
of sewage is such that its nutrient content creates a serious eutrophication problem (as is the
case in the United States today), or if supply considerations dictate the reuse of sewage water
for industry, agriculture, or groundwater recharge, advanced treatment is necessary. The cost
ranges from two to four times as much as for secondary treatment (17 cents per 1000 gallons
for carbon absorption; 34 cents per 1000 gallons for disinfection to yield a potable supply).
This dramatic example of diminishing returns in pollution control could be repeated for stack
gases, automobile exhausts, and so forth.
Now consider a situation in which the limited capacity of the environment to absorb abuse
requires that we hold man’s impact in some sector constant as population doubles. This
means per capita effectiveness of pollution control in this sector must double (that is, effluent
per person must be halved). In a typical situation, this would yield doubled per capita costs, or
quadrupled total costs (and probably energy consumption) in this sector for a doubling of
population. Of course, diminishing returns and threshold effects may be still more serious: we
may easily have an eightfold increase in control costs for a doubling of population. Such
arguments leave little ground for the assumption, popularized by Barry Commoner (2, 8) and
others, that a 1 percent rate of population growth spawns only 1 percent effects.
It is to be emphasized that the possible existence of “economies of scale” does not invalidate
these arguments. Such savings, if available at all, would apply in the case of our sewage
example to a change in the amount of effluent to be handled at an installation of a given type.
For most technologies, the United States is already more than populous enough to achieve such
economies and is doing so. They are accounted for in our example by citing figures for the
largest treatment plants of each type. Population growth, on the other hand, forces us into
quantitative and qualitative changes in how we handle each unit volume of effluent—what
fraction and what kinds of material we remove. Here economies of scale do not apply at all,
and diminishing returns are the rule.
44
GLOBAL CONTEXT
We will not deal in detail with the best example of the global nature and interconnections of
population resource and environmental problems—namely, the problems involved in feeding
a world in which 10 to 20 million people starve to death annually (9), and in which the
population is growing by some 70 million people per year. The ecological problems created by
high-yield agriculture are awesome (3, 10) and are bound to have a negative feedback on food
production. Indeed, the Food and Agriculture Organization of the United Nations has reported
that in 1969 the world suffered its first absolute decline in fisheries yield since 1950. It seems
likely that part of this decline is attributable to pollution originating in terrestrial agriculture.
A second source of the fisheries decline is, of course, overexploitation of fisheries by the
developed countries. This problem, in turn, is illustrative of the situation in regard to many
other resources, where similarly rapacious and shortsighted behavior by the developed nations
is compromising the aspirations of the bulk of humanity to a decent existence. It is now
becoming more widely comprehended that the United States alone accounts for perhaps 30
percent of the nonrenewable resources consumed in the world each year (for example, 37
percent of the energy, 25 percent of the steel, 28 percent of the tin, and 33 percent of the
synthetic rubber) (11). This behavior is in large part inconsistent with American rhetoric about
“developing” the countries of the Third World. We may be able to afford the technology to
mine lower grade deposits when we have squandered the world’s rich ores, but the
underdeveloped countries, as their needs grow and their means remain meager, will not be able
to do so. Some observers argue that the poor countries are today economically dependent on
our use of their resources, and indeed that economists in these countries complain that world
demand for their raw materials is too low (1). This proves only that their economists are as
shortsighted as ours.
It is abundantly clear that the entire context in which we view the world resource pool and the
relationships between developed and underdeveloped countries must be changed, if we are to
have any hope of achieving a stable and prosperous existence for all human beings. It cannot
be stated too forcefully that the developed countries (or, more accurately, the overdeveloped
countries) are the principal culprits in the consumption and dispersion of the world’s
nonrenewable resources (12) as well as in appropriating much more than their share of the
world’s protein. Because of this consumption, and because of the enormous negative impact
45
on the global environment accompanying it, the population growth in these countries must be
regarded as the most serious in the world today.
In relation to theorem 2 we must emphasize that, even if population growth were halted, the
present population of the world could easily destroy civilization as we know it. There is a wide
choice of weapons—from unstable plant monocultures and agricultural hazes to DDT,
mercury, and thermonuclear bombs. If population size were reduced and per capita
consumption remained the same (or increased), we would still quickly run out of vital, high-
grade resources or generate conflicts over diminishing supplies. Racism, economic
exploitation, and war will not be eliminated by population control (of course, they are unlikely
to be eliminated without it).
Population Density and Distribution

Theorem 3 deals with a problem related to the inequitable utilization of world resources. One
of the commonest errors made by the uninitiated is to assume that population density (people
per square mile) is the critical measure of overpopulation or underpopulation. For instance,
Wattenberg states that the United States is not very crowded by “international standards”
because Holland has 18 times the population density (13). We call this notion “the Netherlands
fallacy.” The Netherlands actually requires large chunks of the earth’s resources and vast areas
of land not within its borders to maintain itself. For example, it is the second largest per capita
importer of protein in the world, and it imports 63 percent of its cereals, including 100 percent
of its corn and rice. It also imports all of its cotton, 77 percent of its wool, and all of its iron
ore, antimony, bauxite, chromium, copper, gold, lead, magnesite, manganese, mercury,
molybdenum, nickel, silver, tin, tungsten, vanadium, zinc, phosphate rock (fertilizer), potash
(fertilizer), asbestos, and diamonds. It produces energy equivalent to some 20 million metric
tons of coal and consumes the equivalent of over 47 million metric tons (14).
A certain preoccupation with density as a useful measure of overpopulation is apparent in the

article by Coale (1). He points to the existence of urban problems such as smog in Sydney,
Australia, “even though the total population of Australia is about 12 million in an area 80
percent as big as the United States,” as evidence that environmental problems are unrelated to
population size. His argument would be more persuasive if problems of
population distribution were the only ones with environmental consequences, and if population
distribution were unrelated to resource distribution and population size. Actually, since the
46
carrying capacity of the Australian continent is far below that of the United States, one
would expect distribution problems—of which Sydney’s smog is one symptom—to be
encountered at a much lower total population there. Resources, such as water, are in very short
supply, and people cluster where resources are available. (Evidently, it cannot be emphasized
enough that carrying capacity includes the availability of a wide variety of resources in addition
to space itself, and that population pressure is measured relative to the carrying capacity. One
would expect water, soils, or the ability of the environment to absorb wastes to be the limiting
resource in far more instances than land area.)
In addition, of course, many of the most serious environmental problems are essentially
independent of the way in which population is distributed. These include the global problems
of weather modification by carbon dioxide and particulate pollution, and the threats to the
biosphere posed by man’s massive inputs of pesticides, heavy metals, and oil (15). Similarly,
the problems of resource depletion and ecosystem simplification by agriculture depend on how
many people there are and their patterns of consumption, but not in any major way on how they
are distributed.
Naturally, we do not dispute that smog and most other familiar urban ills are serious problems,
or that they are related to population distribution. Like many of the difficulties we face, these
problems will not be cured simply by stopping population growth; direct and well-conceived
assaults on the problems themselves will also be required. Such measures may occasionally
include the redistribution of population, but the considerable difficulties and costs of this
approach should not be underestimated. People live where they do not because of a perverse
intention to add to the problems of their society but for reasons of economic necessity,
convenience, and desire for agreeable surroundings. Areas that are uninhabited or sparsely
populated today are presumably that way because they are deficient in some of the requisite
factors. In many cases, the remedy for such deficiencies—for example, the provision of water
and power to the wastelands of central Nevada—would be extraordinarily expensive in dollars,
energy, and resources and would probably create environmental havoc. (Will we justify the
rape of Canada’s rivers to “colonize” more of our western deserts?)
Moving people to more “habitable” areas, such as the central valley of California or, indeed,
most suburbs, exacerbates another serious problem— the paving-over of prime farmland. This
is already so serious in California that, if current trends continue, about 50 percent of the best
47
acreage in the nation’s leading agricultural state will be destroyed by the year 2020 (16).
Encouraging that trend hardly seems wise.
Whatever attempts may be made to solve distribution-related problems, they will be

undermined if population growth continues, for two reasons. First, population growth and the
aggravation of distribution problems are correlated—part of the increase will surely be
absorbed in urban areas that can least afford the growth. Indeed, barring the unlikely prompt
reversal of present trends, most of it will be absorbed there. Second, population growth puts a
disproportionate drain on the very financial resources needed to ’combat its symptoms.
Economist Joseph Spengler has estimated that 4 percent of national income goes to support our
1 percent per year rate of population growth in the United States (17). The 4 percent figure now
amounts to about $30 billion per year. It seems safe to conclude that the faster we grow the less
likely it is that we will find the funds either to alter population distribution patterns or to deal
more comprehensively and realistically with our problems.
48
Policies to Address Population Growth Nationally and Globally
Global population is increasing by about 1.5 percent per year, a growth rate (should it persist)
that in less than half a century will double the number of people who live on the planet. On the
other hand, modern medical techniques are producing life extension but not healthy life
extension, and we are seeing numbers of old and chronically sick or disabled elderly people in
increasingly longer economically unproductive retirements, who need consequentially
increasing numbers of younger people to support them. 1, 2
The ability of the Earth to sustain the human population, posed by Malthus over 200 years
ago, is a serious question. Dependence on finite resources for energy and water is already
threatening international stability. Potentially exponential population growth can only make
matters worse. Improving economic development in the most populous countries of the
developing world (India, China) is leading to changing patterns of demand, as people seek
more affluent lifestyles. Food and energy demands are increasing faster than had been
predicted. Air quality resulting from over-rapid industrialization is becoming a major problem
that will have major public health effects. The likely determinants of climate change, usually
attributed to the developed nations, are now spread throughout the developing world, making
the ability of nations to achieve the targets signed-up to at Kyoto unlikely to be
achieved. Religion is a significant factor in population growth: families in catholic families
tend to be larger than protestant, and Muslim tend to be larger than others.
49
International Moves
In 1994 the United Nations Population Information Network (POPIN) organized an

International Conference of Parliamentarians on Population and Development (ICPPD) and an
International Conference of Parliamentarians on Population and Development (ICPD) in Cairo.
There was a shift in thinking recognized at Cairo, towards viewing population from a more
humane and equitable perspective. The consensus document that was produced recognizes that
consumption in wealthy countries and rapid population growth in poor countries put pressure
on the natural environment, both locally and globally. The OCPPD group issued an agreed
statement that included the following items:
“ We therefore commit ourselves, as elected representatives of the people, to do our

utmost to remove all remaining barriers in our countries that inhibit access to family
planning services, information and education, as well as to help support the provision of
reproductive health and family planning services as widely as possible.
We acknowledge the fact that abortions constitute a major public health concern for women
all over the world. Since the use of family planning methods may prevent the prevalence of
unplanned pregnancies, we call upon all national Governments to reduce the need for
abortion by providing universal access to family planning information and services.
The empowerment of women and the improvement of their political social, economic and
health status are highly important ends in themselves. We further believe that human
development cannot be sustained unless women are guaranteed equal rights and equal status
with men. In this process women should be seen not merely as the beneficiaries of change
but as the agents of change as well. This entails an enhancement of their own gender
awareness. We believe that education is the single most important element on the road to
equality and empowerment of women.”
Rather than simply equating population policy with family planning, the new thinking is that
population growth should be stabilized - and development enhanced - by attacking some of the
roots of the problem: by improving women's access to education, health care, and economic
and political decisions.
Today, more than half of all developing countries have national population policies, and about
130 national governments subsidize family planning services. When polled by the UN in 1994,
91 percent of the countries that lacked national population policies stated that they intended to
50
formulate them in the near future, reflecting a rising global commitment to population-related
concerns. But national policy statements do not necessarily translate into program
implementation.3
Examples from various cultures
China has operated a one-child policy for a number of years, enforced though a system of fines,
relaxed after mass bereavements such as Sichuan Earthquake; the focus of China on population
control helps provide a better health service for women and a reduction in the risks of death
and injury associated with pregnancy. At family planning offices, women receive free
contraception and pre-natal classes. Help is provided for pregnant women to closely monitor
their health. Culturally, traditional religious practice requires a son to perform the parents'
funerals, leading to resistance to the policy in some rural areas when the first-born is as girl.
Growth has indeed slowed, yet during 1996 China added 13 million people to its numbers.
Rural folk have been less cooperative; however, the one-child policy has achieved statistical
wonders. In one generation, China's birth rates have plunged to 1.9 children per mother - a rate
that, if sustained, will lead to depopulation.
According to a recent survey, ethnic minorities are currently growing about 7 times faster
than Han Chinese.
The decline in population growth rate has exacerbated another problem familiar in the West:
rapid ageing. There will be 129 million Chinese over the age of 60 as of the year 2000. By
2020, one in four will be elderly (twice the total present population of the United States) - a
rare burden for a low income country.
The sex ratio at birth (between male and female births) in mainland China reached 117:100 in
the year 2000, substantially higher than the natural baseline, which ranges between 103:100
and 107:100. This suggests differential abortion if the sex is known antenatally.
India operates a two-child policy. During 1970s they used forced sterilization of the poor.
India has greatly increased food production per head over last 20 years, making it better placed
to absorb higher numbers. The country's most recent approach to population issues focuses on
the advancement of women economically, academically, and socially, as independent women
are more likely to have small families.
51
Africa: birth rates in Africa are the highest in the world. By the year 2050, twenty percent of
the world's population will live on the African continent. That will be almost two thousand
million people, up from eight hundred fifty-five million people today. Especially large
population growth is expected in Nigeria, Ethiopia and the Democratic Republic of
Congo. Other countries likely to have major growth include Burkina Faso, Mali, Niger,
Somalia and Uganda.
Kenya was the first country in sub-Saharan Africa to view runaway population growth as a
serious impediment to economic prosperity, and it became the first, in the late 1960s, to begin
developing a national family-planning campaign. The country's official population policy calls
for matching population size with available resources, yet leaves decisions on family size up
to individual families.
As recently as 1970, Africa was essentially self-sufficient in food. What fostered a breakdown
in the continent's ability to feed itself has been a decline of nearly 1 percent per year in per
capita grain production since 1968 - in part due to an annual population growth for the continent
approaching 3 percent.
The root cause of Africa's crisis, according to World watch Institute analyst Lester Brown, is
population growth faster than on any continent in history, widespread soil erosion and
desertification, and a failure by African governments to adequately support agriculture.
Europe: by contrast, France offers financial incentives for larger (3 child) families. The
population of Europe is also aging faster than any other part of the world, except Japan. Birth
rates are also down in many European countries. The number of people depending on workers
will rise as the number of workers falls. Spending in European countries will have to increase
for retirement, health care and long-term care for old people in the future.
Russia faces the most severe population decrease of any country. The population of Russia is
now one hundred forty-three million. It is expected to drop twenty-two percent over the next
forty-five years. If this happens, Russia could lose more than forty percent of its active
workforce and have economic problems. Part of the problem is the short length of time that
Russian men generally live.
52
The average life expectancy for Russian men is just sixty-six years. Russian women live eleven
years longer. Men in Western Europe live sixteen years longer. Drugs, tobacco smoking and
alcohol are some of the main causes of death among Russian men. Russia also has low birth
rates.
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3.8 POPULATION GROWTH AND ECONOMIC

DEVELOPMENT
The relationship between population growth and economic development of a country.
Population growth helps the process of development in certain ways and hampers it in certain
other ways. This is so because the relationship between population growth and economic
development is intricate, complex and interacting.
On the positive side, an increasing population means an increase in the supply of labor— a
basic factor of production. And growth of population and labor supply has all along been one
major source of growth in recorded history. It is to be noted that human labor, assisted by
necessary tools and implements, was always and still is the greatest productive asset of nations.
A growing population leads to an increasing total output. But “it also makes for a greater
number of persons among whom this output must be divided. There are more productive
hands but there are also more mouths to feed.”
The effect of population growth on a society’s per capita output level depends on the pattern
of population growth as also its institutional (organizational) framework. In other words, it
depends on the age composition of the population.
As Gill says, “If, for example, population growth is associated with high fertility and an
increasing number of children relative to adults, then the number of consumers will be growing
more rapidly than the number of producers, the dependency burden on the active workers of
the society will be heavier, and the effect may be negative. But if there is a rise in life-
expectancy which extends the productive years of the workers of the society, then the problem
of an increased burden of dependency may be at least partially offset”.
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In this context the following two points may be noted:
(i) The pattern of spending reflects the age distribution. An ageing population—one that
contains a rising proportion of old people—requires an increasing quantity of products
connected with old age and relatively fewer connected with the young.
The industrial system has to adjust itself to the changing demand for goods and services. This
adjustment could cause problems, particularly because the labor force is less adaptable in an
ageing population.
(ii) Young workers are generally more productive and adaptable. Although older people may
have the advantage of experience, they are likely to be less energetic and enterprising.
Moreover, in an ageing population, the young may have to wait longer to reach positions of
responsibility and this could have a discouraging effect.
Of course, the assertion that young people are more productive is open to contradiction
(especially by their elders). However, few would question the view that they are more adaptable
and easier to train for new jobs. A young population should also provide a larger flow of school-
leavers able to start work in the industries where labor is most needed. The difficulty and
expense involved in the movement of workers between industries are thus avoided.
The ability of workers to move easily from one job to another is called mobility of labor. It is
particularly important in economies such as that of India which must respond not only to
changes of demand at home but also to foreign demand and competition.
(iii) Production depends on the working age group. It is obviously possible to produce more
goods and services and so achieve a higher standard of living if a larger proportion of the
population is in the working age group — between school-leaving and retirement ages —
which must provide the bulk of the country’s labor force.
Moreover, this group bears the burden of supporting the non-working members of the
community. If a larger proportion of the population is either retired or at school, the extra cost
of pensions or education falls on relatively smaller numbers who are working and earning.
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Although the rate of population growth is clearly very important, two other factors must be
taken into account in studying the problem of population pressure in LDCs. The first is the
population density in relation to natural resources and the second is technology.
A growing population, within a limited geographical area, usually puts heavy pressure on the
existing factor endowments, especially natural resources of the community. Moreover, if the
society has a limited stock of capital, labor may have to be substituted for capital in which case
the production function will exhibit the law of diminishing returns.
This occurs if the variable factor is labor, while capital is a fixed factor. Diminishing returns
may become a serious problem if population growth is rapid and there occurs practically no or
at best, a marginal increase in natural resources (land) or man-made resources (capital goods).
However, technological progress convert the operation of the law, at least temporarily.
In studying the population problem of LDCs we have to take note of the absolute size of the
population base. The size of the population base is of great importance as it affects the total
scale of the economy. This is relevant for the success of industrialization inasmuch as
development is often hindered due to the small size of the domestic market.
A growing population means a growing market for most goods and services and we know that
division of labor is limited by the extent of the market. A potentially expanding market may
stimulate entrepreneurs to invest more and more in capital goods and machinery. Business
activity will be spurred as a consequence.
And more income and employment will be created in the process. Moreover, it will provide an
outlet for the products of efficient large-scale, mass-production industries. The net effect may
be favorable to the country.
Of course, the size of the domestic market of a country does not only depend on the numbers,
but also on the per capita income level. But given the same low level of income per head, a
country like India offers a more favorable environment for setting up heavy capital goods
industries which depend so much on the economies of scale for their success. In contrast, a
thickly populated country with a small population base such as Sri Lanka seems to be especially
handicapped by the small size of its domestic market.
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Population growth has been a favorable factor in stimulating growth in many countries in the
last two centuries, when vast areas remained largely unsettled. Even in the USA, in the 1930s,
it was apprehended that a slowing down of the rate of population growth would lead to long-
run (secular) stagnation.
Contrarily, in India today the prophecies of Malthus have largely proved their validity. And it
is believed that a slowing down of population increase might contribute substantially to our
development prospects. So, what is sauce for a goose may not be a sauce for a gander.
The moot point is that population growth may be either favorable or unfavorable to economic
development, depending on where, when, and how it takes. It is to be noted that while large
populations of the advanced countries have grown up after, and as a consequence of, economic
development, that large populations of the developing countries exist before development. This
makes development not only more desirable but also more difficult.
Per capita income is calculated by dividing national income by the size of the population. When
population is increasing faster than national income or GNP the standard of living of the
average citizen does not improve. In most developing countries population is growing steadily
even today. This is important obstacles to development. The most serious problem for most
developing countries seem to be controlling the growth of their population.
Negative Effect:
Population growth has a negative effect on growth for the following three reasons:
(i) Capital swallowing:
Rapid population growth reduces per capita availability of capital and thus lowers labor
productivity.
(ii) Age dependency:

Rapid population growth produces a large number of dependent children whose consumption
requirements lower the ability of the economy to save.
(iii) Investment diversion:

Rapid population growth shifts government expenditures from the country’s infrastructure
(roads, communications, etc.) to education and health care.
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The harmful effects of population growth seems to be more pronounced in countries where
arable land and water are relatively scarce. The World Bank has started the population growth
above 2% per annum acts as a brake on economic development.
We should not, however, miss the point that there is a two-way causation. So far we have
studied the effect of population growth on economic development. In a like manner, economic
development may also have important effects on population growth.
The last two centuries have witnessed a fall in the death rate and the consequent growth of
population in today’s economically advanced countries. But birth rate also fell. Economic
development brought in its wake higher standards of living, better food, adequate clothing and
shelter as also protection from the natural disasters of drought and famine.
There also occurred improvement in medical facilities and health care. These led to fall in
infant mortality and more healthier people and longer life-expectations. These were all related
to the economic progress these countries were making. “In general, therefore, the modern
increase in population in the developing countries of Europe and North America occurred
along with, and was really part and parcel of, a, more general process of rising living
standards, industrialization, and technological progress.”
When we turn to ‘population explosion’ problem of developing countries we see that these
countries have shown very little economic growth. Yet their populations are expanding rapidly.
These countries are importing western technology to start modern industrialization program
but are unable to emulate or import the growth process itself.
The spread of Western techniques, health care, sanitation and medicine to such countries has
brought sharply falling death rate and rapid population growth. But the standard of living is yet
to achieve an appreciable improvement. And the other accompaniments of economic
development are conspicuous by their absence.
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Economic growth can be defined as the increase in the inflation-adjusted market value of the
goods and services produced by an economy over time. Statisticians conventionally measure
such growth as the percent rate of increase in real gross domestic product, or real GDP.
Growth is usually calculated in real terms – i.e., inflation-adjusted terms – to eliminate the
distorting effect of inflation on the prices of goods produced. Measurement of economic
growth uses national income accounting. Since economic growth is measured as the annual
percent change of gross domestic product (GDP), it has all the advantages and drawbacks of
that measure. The economic growth-rates of countries are commonly compared by
whom?] using the ratio of the GDP to population (per-capita income).
The "rate of economic growth" refers to the geometric annual rate of growth in GDP between
the first and the last year over a period of time. This growth rate represents the trend in the
average level of GDP over the period, and ignores any fluctuations in the GDP around this
trend.
Economists refer to an increase in economic growth caused by more efficient use of inputs
(increased productivity of labor, of physical capital, of energy or of materials) as intensive
growth. In contrast, GDP growth caused only by increases in the amount of inputs available
for use (increased population, for example, or new territory) counts as extensive growth.
Development of new goods and services also generates economic growth. As it so happens, in
the U.S. about 60% of consumer spending in 2013 went on goods and services that did not
exist in 1869.
Long- Term Growth
Living standards vary widely from country to country, and furthermore, the change in living
standards over time varies widely from country to country. Below is a table which shows GDP
per person and annualized per person GDP growth for a selection of countries over a period of
about 100 years. The GDP per person data are adjusted for inflation, hence they are "real".
GDP per person (more commonly called "per capita" GDP) is the GDP of the entire country
divided by the number of people in the country; GDP per person is conceptually analogous to
"average income".
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Seemingly small differences in yearly GDP growth lead to large changes in GDP
when compounded over time. For instance, in the above table, GDP per person in the United
Kingdom in the year 1870 was $4,808. At the same time in the United States, GDP per person
was $4,007, lower than the UK by about 20%. However, in 2008 the positions were reversed:
GDP per person was $36,130 in the United Kingdom and $46,970 in the United States, i.e.
GDP per person in the US was 30% more than it was in the UK. As the above table shows, this
means that GDP per person grew, on average, by 1.80% per year in the US and by 1.47% in
the UK. Thus, a difference in GDP growth by only a few tenths of a percent per year results in
large differences in outcomes when the growth is persistent over a generation. This and other
observations have led some economists to view GDP growth as the most important part of the
field of macroeconomics.
Growth and innovation
It has been observed that GDP growth is influenced by the size of the economy. The relation
between GDP growth and GDP across the countries at a particular point of time is convex.
Growth increases with GDP reaches its maximum and then begins to decline. There exists some
extreme value. This is not exactly middle-income trap. It is observed for both developed and
developing economies. Actually, countries having this property belong to conventional growth
domain. However, the extreme could be extended by technological and policy innovations and
some countries move into innovative growth domain with higher limiting values.
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Determinants of per capita GDP growth
In national income accounting, per capita output can be calculated using the following factors:
output per unit of labor input (labor productivity), hours worked (intensity), the percentage of
the working-age population actually working (participation rate) and the proportion of the
working-age population to the total population (demographics). "The rate of change of
GDP/population is the sum of the rates of change of these four variables plus their cross
products."
Economists distinguish between long-run economic growth and short-run economic changes
in production. Short-run variation in economic growth is termed the business cycle. Generally,
economists attribute the ups and downs in the business cycle to fluctuations in aggregate
demand. In contrast, economic growth is concerned with the long-run trend in production due
to structural causes such as technological growth and factor accumulation.
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Productivity
Increases in labor productivity (the ratio of the value of output to labor input) have historically
been the most important source of real per capita economic growth. "In a famous estimate, MIT
Professor Robert Solow concluded that technological progress has accounted for 80 percent of
the long-term rise in U.S. per capita income, with increased investment in capital explaining
only the remaining 20 percent.’’
Increases in productivity lower the real cost of goods. Over the 20th century the real price of
many goods fell by over 90%.
Economic growth has traditionally been attributed to the accumulation of human and physical
capital and the increase in productivity and creation of new goods arising from technological
innovation. Further division of labor (specialization) is also fundamental to rising productivity.
Before industrialization technological progress resulted in an increase in the population, which

was kept in check by food supply and other resources, which acted to limit per capita income,
a condition known as the Malthusian trap. The rapid economic growth that occurred during
the Industrial Revolution was remarkable because it was in excess of population growth,
providing an escape from the Malthusian trap. Countries that industrialized eventually saw
their population growth slow down, a phenomenon known as the demographic transition.
Increases in productivity are the major factor responsible for per capita economic growth—this
has been especially evident since the mid-19th century. Most of the economic growth in the
20th century was due to increased output per unit of labor, materials, energy, and land (less
input per widget). The balance of the growth in output has come from using more inputs. Both
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of these changes increase output. The increased output included more of the same goods
produced previously and new goods and services.
During the Industrial Revolution, mechanization began to replace hand methods in

manufacturing, and new processes streamlined production of chemicals, iron, steel, and other
products.[23] Machine tools made the economical production of metal parts possible, so that
parts could be interchangeable.
During the Second Industrial Revolution, a major factor of productivity growth was the
substitution of inanimate power for human and animal labor. Also there was a great increase
in power as steam-powered electricity generation and internal combustion supplanted limited
wind and water power. Since that replacement, the great expansion of total power was driven
by continuous improvements in energy conversion efficiency. Other major historical sources
of productivity were automation, transportation infrastructures (canals, railroads, and
highways), new materials (steel) and power, which includes steam and internal combustion
engines and electricity. Other productivity improvements included mechanized agriculture and
scientific agriculture including chemical fertilizers and livestock and poultry management, and
the Green Revolution. Interchangeable parts made with machine tools powered by electric
motors evolved into mass production, which is universally used today.
Great sources of productivity improvement in the late 19th century were railroads, steam ships,
horse-pulled reapers and combine harvesters, and steam-powered factories. The invention of
processes for making cheap steel were important for many forms of mechanization and
transportation. By the late 19th century both prices and weekly work hours fell because less
labor, materials, and energy were required to produce and transport goods. However, real
wages rose, allowing workers to improve their diet, buy consumer goods and afford better
housing.
Mass production of the 1920s created overproduction, which was arguably one of
several causes of the Great Depression of the 1930s. Following the Great Depression, economic
growth resumed, aided in part by increased demand for existing goods and services, such as
automobiles, telephones, radios, electricity and household appliances. New goods and services
included television, air conditioning and commercial aviation (after 1950), creating enough
new demand to stabilize the work week. The building of highway infrastructures also
contributed to post World War II growth, as did capital investments in manufacturing and
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chemical industries. The post-World War II economy also benefited from the discovery of vast
amounts of oil around the world, particularly in the Middle East. By John W.
Kendrick's estimate, three-quarters of increase in U.S. per capita GDP from 1889 to 1957 was
due to increased productivity.
Economic growth in the United States slowed down after 1973. In contrast growth in Asia has
been strong since then, starting with Japan and spreading to Four Asian
Tigers, China, Southeast Asia, the Indian subcontinent and Asia Pacific. In 1957 South
Korea had a lower per capita GDP than Ghana, and by 2008 it was 17 times as high as
Ghana's. The Japanese economic growth has slackened considerably since the late 1980s.
Productivity in the United States grew at an increasing rate throughout the 19th century and
was most rapid in the early to middle decades of the 20th century. U.S. productivity growth
spiked towards the end of the century in 1996–2004, due to an acceleration in the rate of
technological innovation known as Moore's law. After 2004 U.S. productivity growth returned
to the low levels of 1972–96.
Growth theories
The Malthusian theory
The Malthusian theory proposes that over most of human history technological progress caused
larger population growth but had no impact on income per capita in the long run. According to
the theory, while technologically advanced economies over this epoch were characterized by
higher population density, their level of income per capita was not different than those among
technologically regressed society.
The conceptual foundations of the Malthusian theory were formed by Thomas Malthus, and a
modern representation of these approach is provided by Ashraf and Galor. In line with the
predictions of the Malthusian theory, a cross-country analysis finds a significant positive effect
of the technological level on population density and an insignificant effect on income per capita
significantly over the years 1–1500.
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Classical growth theory
In classical (Ricardian) economics, the theory of production and the theory of growth are based
on the theory or law of variable proportions, whereby increasing either of the factors of
production (labor or capital), while holding the other constant and assuming no technological
change, will increase output, but at a diminishing rate that eventually will approach zero. These
concepts have their origins in Thomas Malthus’s theorizing about agriculture. Malthus's
examples included the number of seeds harvested relative to the number of seeds planted
(capital) on a plot of land and the size of the harvest from a plot of land versus the number of
workers employed. See also Diminishing returns.
Criticisms of classical growth theory are that technology, an important factor in economic
growth, is held constant and that economies of scale are ignored.
One popular theory in the 1940s was the big push model, which suggested that countries needed
to jump from one stage of development to another through a virtuous cycle, in which large
investments in infrastructure and education coupled with private investments would move the
economy to a more productive stage, breaking free from economic paradigms appropriate to a
lower productivity stage. The idea was revived and formulated rigorously, in the late 1980s
by Kevin Murphy, Andrei Shleifer and Robert Vishny.
Solow–Swan model
Robert Solow and Trevor Swan developed what eventually became the main model used in
growth economics in the 1950s. This model assumes that there are diminishing returns to
capital and labor. Capital accumulates through investment, but its level or stock continually
decreases due to depreciation. Due to the diminishing returns to capital, with increases in
capital/worker and absent technological progress, economic output/worker eventually reaches
a point where capital per worker and economic output/worker remain constant because annual
investment in capital equals annual depreciation. This condition is called the 'steady state'.
In the Solow–Swan model if productivity increases through technological progress, then

output/worker increases even when the economy is in the steady state. If productivity increases
at a constant rate, output/worker also increases at a related steady-state rate. As a consequence,
growth in the model can occur either by increasing the share of GDP invested or through
technological progress. But at whatever share of GDP invested, capital/worker eventually
converges on the steady state, leaving the growth rate of output/worker determined only by the
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rate of technological progress. As a consequence, with world technology available to all and
progressing at a constant rate, all countries have the same steady state rate of growth. Each
country has a different level of GDP/worker determined by the share of GDP it invests, but all
countries have the same rate of economic growth. Implicitly in this model rich countries are
those that have invested a high share of GDP for a long time. Poor countries can become rich
by increasing the share of GDP they invest. One important prediction of the model, mostly
borne out by the data, is that of conditional convergence; the idea that poor countries will grow
faster and catch up with rich countries as long as they have similar investment (and saving)
rates and access to the same technology.
The Solow–Swan model is considered an "exogenous" growth model because it does not
explain why countries invest different shares of GDP in capital nor why technology improves
over time. Instead, the rate of investment and the rate of technological progress are exogenous.
The value of the model is that it predicts the pattern of economic growth once these two rates
are specified. Its failure to explain the determinants of these rates is one of its limitations.
Although the rate of investment in the model is exogenous, under certain conditions the model
implicitly predicts convergence in the rates of investment across countries. In a global economy
with a global financial capital market, financial capital flows to the countries with the highest
return on investment. In the Solow-Swan model countries with less capital/worker (poor
countries) have a higher return on investment due to the diminishing returns to capital. As a
consequence, capital/worker and output/worker in a global financial capital market should
converge to the same level in all countries. Since historically financial capital has not flowed
to the countries with less capital/worker, the basic Solow–Swan model has a conceptual flaw.
Beginning in the 1990s, this flaw has been addressed by adding additional variables to the
model that can explain why some countries are less productive than others and, therefore, do
not attract flows of global financial capital even though they have less (physical)
capital/worker.
In practice, convergence was rarely achieved. In 1957, Solow applied his model to data from
the U.S. gross national product to estimate contributions. This showed that the increase in
capital and labor stock only accounted for about half of the output, while the population
increase adjustments to capital explained eighth. This remaining unaccounted growth output is
known as the Solow Residual. Here the A of (t) "technical progress" was the reason for
increased output. Nevertheless, the model still had flaws. It gave no room for policy to
influence the growth rate. Few attempts were also made by the RAND Corporation the non-
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profit think tank and frequently visiting economist Kenneth Arrow to work out the kinks in the
model. They suggested that new knowledge was indivisible and that it is endogenous with a
certain fixed cost. Arrow's further explained that new knowledge obtained by firms comes from
practice and built a model that "knowledge" accumulated through experience.
According to Harrod, the natural growth rate is the maximum rate of growth allowed by the
increase of variables like population growth, technological improvement and growth in natural
resources.
In fact, the natural growth rate is the highest attainable growth rate which would bring about
the fullest possible employment of the resources existing in the economy.
Endogenous growth theory
Unsatisfied with the assumption of exogenous technological progress in the Solow–Swan

model, economists worked to "endogenize" (i.e., explain it "from within" the models)
productivity growth in the 1980s; the resulting endogenous growth theory, most notably
advanced by Robert Lucas, Jr. and his student Paul Romer, includes a mathematical
explanation of technological advancement. This model also incorporated a new concept
of human capital, the skills and knowledge that make workers productive. Unlike physical
capital, human capital has increasing rates of return. Research done in this area has focused on
what increases human capital (e.g. education) or technological change (e.g. innovation).
On Memorial Day weekend in 1988, a conference in Buffalo brought together the great minds
in economics the idea was to evaluate the conflicting theories of growth. Romer, Krugman,
Barro, Becker were in attendance along with many other rising stars and high profiled
economists of the time. Amongst many papers that day the one that stood out was Romer's
"Micro Foundations for Aggregate Technological Change." The Micro Foundation claimed
that endogenous technological change had the concept of Intellectual Property imbedded and
that knowledge is an input and output of production. Romer argued that outcomes to the
national growth rates were significantly affected by public policy, trade activity, and
intellectual property. He stressed that cumulative capital and specialization were key, and that
not only population growth can increase capital of knowledge, it was human capital that is
specifically trained in harvesting new ideas.
While intellectual property may be important, Baker (2016) cites multiple sources claiming
that "stronger patent protection seems to be associated with slower growth". That's particularly
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true for patents in the ethical health care industry. In effect taxpayers pay twice for new drugs
and diagnostic procedures: First in tax subsidies and second for the high prices of diagnostic
procedures treatments. If the results of research paid by taxpayers were placed in the public
domain, Baker claims that people everywhere would be healthier, because better diagnoses and
treatment would be more affordable the world over.
One branch of endogenous growth theory was developed on the foundations of the
Schumpeterian theory, named after the 20th-century Austrian economist Joseph
Schumpeter. The approach explains growth as a consequence of innovation and a process of
creative destruction that captures the dual nature of technological progress: in terms of creation,
entrepreneurs introduce new products or processes in the hope that they will enjoy temporary
monopoly-like profits as they capture markets. In doing so, they make old technologies or
products obsolete. This can be seen as an annulment of previous technologies, which makes
them obsolete, and "destroys the rents generated by previous innovations". A major model that
illustrates Schumpeterian growth is the Aghion–Howitt model
Unified growth theory
Unified growth theory was developed by Oded Galor and his co-authors to address the inability
of endogenous growth theory to explain key empirical regularities in the growth processes of
individual economies and the world economy as a whole. Unlike endogenous growth theory
that focuses entirely on the modern growth regime and is therefore unable to explain the roots
of inequality across nations, unified growth theory captures in a single framework the
fundamental phases of the process of development in the course of human history: (i) the
Malthusian epoch that was prevalent over most of human history, (ii) the escape from
the Malthusian trap, (iii) the emergence of human capital as a central element in the growth
process, (iv) the onset of the fertility decline, (v) the origins of the modern era of sustained
economic growth, and (vi) the roots of divergence in income per capita across nations in the
past two centuries. The theory suggests that during most of human existence, technological
progress was offset by population growth, and living standards were near subsistence across
time and space. However, the reinforcing interaction between the rate of technological progress
and the size and composition of the population has gradually increased the pace of
technological progress, enhancing the importance of education in the ability of individuals to
adapt to the changing technological environment. The rise in the allocation of resources
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towards education triggered a fertility decline enabling economies to allocate a larger share of
the fruits of technological progress to a steady increase in income per capita, rather than
towards the growth of population, paving the way for the emergence of sustained economic
growth. The theory further suggests that variations in biogeographically characteristics, as well
as cultural and institutional characteristics, have generated a differential pace of transition from
stagnation to growth across countries and consequently divergence in their income per capita
over the past two centuries.
Inequality and growth
The prevailing views about the role of inequality in the growth process has radically shifted in
the past century.
The classical perspective, as expressed by Adam Smith, and others, suggests that inequality
fosters the growth process. Specifically, since the aggregate saving increases with inequality
due to higher property to save among the wealthy, the classical viewpoint suggests that
inequality stimulates capital accumulation and therefore economic growth.
The Neoclassical perspective that is based on representative agent approach denies the role of
inequality in the growth process. It suggests that while the growth process may affect
inequality, income distribution has no impact on the growth process.
The modern perspective which has emerged in the late 1980s suggests, in contrast, that income
distribution has a significant impact on the growth process. The modern perspective, originated
by Galor and Zeira, highlights the important role of heterogeneity in the determination of
aggregate economic activity, and economic growth. In particular, Galor and Zeira argue that
since credit markets are imperfect, inequality has an enduring impact on human
capital formation, the level of income per capita, and the growth process.[108] In contrast to
the classical paradigm, which underlined the positive implications of inequality for capital
formation and economic growth, Galor and Zeira argue that inequality has an adverse effect
on human capital formation and the development process, in all but the very poor economies.
Later theoretical developments have reinforced the view that inequality has an adverse effect
on the growth process. Specifically, Alesina and Rodrik and Persson and Tabellini advance a
political economy mechanism and argue that inequality has a negative impact on economic
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development since it creates a pressure for distortionary redistributive policies that have an
adverse effect on investment and economic growth.
In accordance with the credit market imperfection approach, a study by Roberto Perotti showed
that inequality is associated with lower level of human capital formation (education,
experience, apprenticeship) and higher level of fertility, while lower level of human capital is
associated with lower growth and lower levels of economic growth. In contrast, his
examination of the political economy channel found no support for the political economy
mechanism. Consequently, the political economy perspective on the relationship between
inequality and growth have been revised and later studies have established that inequality may
provide an incentive for the elite to block redistributive policies and institutional changes. In
particular, inequality in the distribution of land ownership provides the landed elite with an
incentive to limit the mobility of rural workers by depriving them from education and by
blocking the development of the industrial sector.
A unified theory of inequality and growth that captures that changing role of inequality in the
growth process offers a reconciliation between the conflicting predictions of classical
viewpoint that maintained that inequality is beneficial for growth and the modern viewpoint
that suggests that in the presence of credit market imperfections, inequality predominantly
results in underinvestment in human capital and lower economic growth. This unified theory
of inequality and growth, developed by Oded Galor and Omer Moav, suggests that the effect
of inequality on the growth process has been reversed as human capital has replaced physical
capital as the main engine of economic growth. In the initial phases of industrialization, when
physical capital accumulation was the dominating source of economic growth, inequality
boosted the development process by directing resources toward individuals with higher
propensity to save. However, in later phases, as human capital become the main engine of
economic growth, more equal distribution of income, in the presence of credit constraints,
stimulated investment in human capital and economic growth.
In 2013, French economist Thomas Piketty postulated that in periods when the average annual
rate on return on investment in capital (r) exceeds the average annual growth in economic
output (g), the rate of inequality will increase. According to Piketty, this is the case because
wealth that is already held or inherited, which is expected to grow at the rate r, will grow at a
rate faster than wealth accumulated through labor, which is more closely tied to g. An advocate
of reducing inequality levels, Piketty suggests levying a global wealth tax in order to reduce
the divergence in wealth caused by inequality.
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4. SUGGESTATION S TO CONTROL POPULATION EXPLOSION
1- To control the population rate, the best method is to increase the income rate.
2- Promoting delayed marriages.
3- Encouraging female education and employment.
4- Making available family planning methods through different outlets in urban, semi-urban
and rural areas.
5- Government should provide incentives and awards to people for adopting and promoting
family planning measures.
6- Government of India has made many laws regarding raising the minimum age of females
marriages, education of child labor and others i.e. family planning. Government should take
strict steps and make laws against the people who do not follow it.
7- “Family Planning” means bearing of a child by will not by chance.
8- Economic growth needs to be more equitably opportunities.
9- Invest in health infrastructure to reduce infant and child mortality rate.
10- Social consensus for small family norm is promoted.
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5. CONCLUSION
The above analysis shows that high growth rate of population has slowed down the pace of
economic development in the developing countries. On the basis of above argument my
hypothesis holds true that population growth is constraint for development. It is found that the
fast increasing population makes the task of absorbing the labor force in productive activities
all the more difficult. So large increase in population is more a liability than an asset in the
developing countries. It has also been also examined that increasing demand for agricultural
land, firewood, dwelling units’ etc. results in deforestation which adversely affects soil fertility,
causes floods and affects the climate. It can be concluded large size of population and its fast
rate of growth increases the consumption needs. This increases consumption expenditure. So
saving rate and capital formation does not increase much. A part of resources mobilized by
such economies are eaten away by fast growing population. Despite this conclusion I want to
express that the correlation between population growth and economic development could be
favorable only when increasing population is proportionate to resources available in country
and resources are to be exploited in its full capacity, in effective and efficient manner by the
skillful, talented human resources in the countries like India.
72
6. REFERENCE
India’s Population Problems, 1974 - Agarwal, S.N.-.
Demography - Jhingan, M.L.
Growth of Population in India - Mamoria, C.B.
Indian Economy - JOURNAL Prati yogita Darpan
Indian Census 2001 and 2011 - PUBLISHED BY INDIAN GOVERNMENT
en.wikipidia.org
www.scribd.com
www.investoopedia.com
www.econimoctime.com
www.statista.com
73
7. ANNEXURE
QUESTIONNAIRE
1. Which of the following could not be considered a major economic system?
a. capitalism.
b. communism.
c. socialism.
d. physical quality of life index.
Answer: D
2. Economic development refers to
a. Economic growth.
b. Economic growth plus changes in output distribution and economic structure.
c. Improvement in the well-being of the urban population.
d. Sustainable increases in Gross National Product.
Answer: D
3. The Physical Quality of Life Index (PQLI) combines three indicators. They are
a. infant mortality, life expectancy and adult literacy rate.
b. crime rate, clean environment and quality of housing.
c. air pollution rate, water pollution rate and sanitation.
d. health, education and environment.
Answer: C
74
4. As economic development proceeds, income inequality tends to follow a(n) __________

curve.
a. convex.
b. inverted U-shaped.
c. L-shaped.
d. S-Shaped.
Answer: B
5. According to Lewis’s model, the dual economy grows only when
a. the modern sector increases its output share relative to the traditional sector.
b. agricultural sector uses modern equipment.
c. agricultural sector hires labor economically.
d. modern manufacturing sector is labor-intensive.
Answer: D
6. Dual economies are countries
a. with double capital and labor
b. with a modern manufacturing sector as well as traditional agriculture sector.
c. that specialize in labor-intensive products more than capital-intensive products.
d. with foreign-owned and domestically-owned capital.
Answer: B
75
7. The essential difference between capitalism and socialism is that
a. capitalism exploits the worker and socialism exploits the property owner.
b. capitalism relies on the market to make economic decisions and socialism uses central
planning.
c. capitalism grows through rent seeking and socialism grows through government direction.
d. capitalism relies on consumer satisfaction to dictate choices and socialism relies on

producer satisfaction.
Answer: B
8. A period of rapid population growth between a preindustrial, stable population

characterized by high birth and death rates and a later, modern, stable population marked by
low fertility and mortality is known as
a. demographic transition.
b. population maturity.
c. demobilizing population.
d. birth-death transformation.
Answer: A
9. The _______________ is the ratio of the non-working population (under 15 years old and
over 64 years old) to the working-age population.
a. labor force participation rate.
b. per capita population ratio.
c. population transition.
d. dependency ratio.
Answer: D
76
10. A stationary population is when population growth is
a. increasing at an increasing rate.
b. decreasing.
c. zero.
d. 100%.
Answer: C
11. The Essay on the Principle of Population was written by
a. The World Bank.
b. Thomas Robert Malthus.
c. Julian Simon.
d. Abraham Lincoln.
Answer: B
12. Malthus's theory was that population
a. increased proportionally to economic growth.
b. increased geometrically, outstripping food supply, which grew arithmetically
c. increased stagnantly with food supply and economic development.
d. increased disproportionately, surpassing agricultural production.
Answer: B
77
13. The total fertility rate (TFR) is
a. the total number of children born in a country in a given year divided by labor force.
b. the number of children born to the average woman during her reproductive years.
c. the number of births in a country divided by total population in a given year.
d. the number of women age 15-45 in a country divided by total population.
Answer: B
14. A production function
a. shows the dependency output of the working population.
b. depicts the relationship between input and output.
c. states the relationship between products and income distribution.
d. is a function of natural resources in a country.
Answer: B
15. Economic growth can be measured by:
a) The CPI
b) The CBI
c) GDP
d) MPC
Answer: C
78

The Effect of Population Growth On Economic Growth

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The Effect of Population Growth On Economic Growth

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The effect of population growth on economic growth

Population is means as well as ends of economic development in India. It an asset if in adequate

2. STATEMENT OF THE PROBLEM

3. DATA ANALYSIS, INTERPRETATION & PRESENTATION

3.1 DOES INDIA’S POPULATION GROWTH HAS A POSITIVE

3.2 POPULATION CAN BE A LIMITING FACTOR TO

1. Population reduces the Rate of Capital Formation:

2. Higher Rate of Population requires more Investment:

3. It reduces per Capita Availability of Capital:

4. Adverse Effect on per Capital Income:

5. Large Population creates the Problem of Unemployment:

6. Rapid Population Growth creates Food Problem:

7. Population and Farming:

8. Population and Vicious Circle in Poverty:

9. Reduction in Efficiency of Labor Force:

10. Rapid Population declines Social Infrastructure:

11. Adverse Effect on Environment:

12. Obstacle to Self-Reliance:

13. Declining trend of Agricultural Development:

14. Growing Population lowers Standard of Living:

3.3 EFFECTS OF OVER-POPULATION

1. Problem of Investment Requirement:

2. Effect on per Capita Income :

3. Problem of Capital Formation :

4. Effect on Food Problem:

6. Low Standard of Living:

7. Burden of Unproductive Consumers:

10. More Pressure on Land:

3.4 RELATIONSHIP BETWEEN POPULATION GROWTH AND

3.5 IMPACT OF INDIA’S POPULATION GROWTH ON

POPULATION GROWTH AND ECONOMIC DEVELOPMENT

1. OVERUSE OF NATURAL RESOURCES-

2. PER CAPITA INCOME

3.6 POPULATION DYNAMICS IN INDIA AND IMPLICATIONS

Section 1: Demographic change and economic growth

Section 1.1: Age structure and some cross-country evidence

Section 1.2: Population health

Section 1.3: Key facts about India’s population

Figure 6 shows an alternative representation of the changing age structure of India’s

Section 2: Review of technical literature

Economists have devised a number of distinct approaches to studying the determinants of

This regression-based approach lends itself naturally to an examination of the influence on

Section 3: India’s economic prospects

Section 3.1 Population aging

Section 3.2: Population heterogeneity

Section 3.3: Urbanization and health

Section 3.4: Capturing India’s economic potential

receiving an education of sufficiently high quality to substantially augment their knowledge,

• Efficient infrastructure (reliable roads, railways, telecommunications, water supply,

• well-developed and competitive financial markets (institutions that facilitate mobilization of

3.7 POPULATION SIZE AND PER CAPITA IMPACT

Population Density and Distribution

A certain preoccupation with density as a useful measure of overpopulation is apparent in the

Whatever attempts may be made to solve distribution-related problems, they will be

Policies to Address Population Growth Nationally and Globally

In 1994 the United Nations Population Information Network (POPIN) organized an

“ We therefore commit ourselves, as elected representatives of the people, to do our

Examples from various cultures