A Billion Aspirations: India Needs To Grow Rich Before It Gets Old

India’s billionth baby was born in May, 2000. The economy was a steady 6.4%, though still recovering from the impact of the sanctions put in place by the United States after the nuclear tests. As one of the 42,000 births that day, the billionth baby was designated to have been born in the Safdarjung Hospital, though no one could be entirely sure. The milestone was part of the Indian government campaign to educate people about the importance of having small families. Newspapers and the still nascent television media had news features and strong editorials worrying about the population problem.

Now two and a half decades later, and 441 million births later our perspective on population has undergone a drastic change, and for good. India today benefits from what demographers call a “demographic dividend” – a period when the working-age population greatly outweighs dependents, where there is scope for accelerated economic growth. With about 65% of the population below the age of 35, and a median age of 28, Indian economy is well-primed to grow rapidly. However, this leap will depend not just on the size of the population, but also on the skills and productivity of the labour force. Like a good successful investment, realising the benefits of demographic dividend requires early and strategic investment. The window of the demographic dividend is a narrow--by 2061, the elderly population will overtake the younger population. If we are not a high income country by then, it would be an opportunity squandered.

The Potential of India’s Demographic Dividend

India’s population is estimated to have crossed 1.45 billion in 2024, making it the most populous country, and one with an overwhelmingly large young population. The dependent population (children and the elderly) is much smaller than the working population, this is the demographic sweet spot which has in the past contributed to rapid economic growth across the world.

It is necessary to reiterate the point that demographic dividend has a narrow window. A population projection for 2047 by the United Nations shows the workforce age bracket’s population will begin decreasing as the median age rises from today’s age of 28 to a projected age of 38 by the year 2050 and the advantage completely vanishes by 2061.

Demographic Profile of India in 2020 and 2050

The economic advantage of a young and substantive population can be harnessed only if the additional labour force resulting from the youth bulge is productively employed, and it must be educated, skilled, and healthy to exercise the right conferred on it. A lot therefore depends on whether and how we are able to ensure an educated, skilled, and healthy population.

The transition from a young working population to an ageing population cannot be avoided and requires careful planning. This transition has in the past led to sustained economic growth in countries that have managed to navigate it through careful planning and smart policymaking. China, South Korea, and Japan are examples of how countries have managed to use their demographic opportunities to achieve notable economic changes in a very short time.

The vision to see India as a developed country by 2047, a centenary as a free country is aspirational and must be welcomed. For now though, India is counted as a lower middle-income country with a per capita income of about US$ 2400. The economists at the World Bank in 2024 put out a report stating that India needs to do a lot of catching up if it wants to avoid the spectre of “middle income trap”, for at current levels in will take 75 years for India to reach 25% of the per capita income of the US.

Learning from International Experience

Asian economies’ experiences hold lessons for India. China’s economic development since the 1980s has been deeply influenced by its demographic dividend, based on massive investments in education and health, and by economic reforms that swiftly unfolded in the 1980s to open up global trade links and accelerate urbanisation.

Similarly, South Korea’s phenomenal economic development between the 1960s and the 1990s was facilitated by investments in education aimed at creating a highly skilled young workforce, increasing female workforce participation, and an eagerness to build industrialisation and technological advancement.

Japan’s post-WWII economic miracle between the mid-1950s and the early 1970s was the result of policies to induce participation of women in the workforce, education and skill opportunities, stimulating technology and industrial efficiency, and maintaining strong systems of social welfare and health across the population pyramid.

Government Spending by Sector: India Share of Expenditure as Percent of GDP

India’s Special Challenges

Although these examples are illuminating, it is imperative to recognise that India has structural problems that are distinctive. Most importantly, more than 81.1% of the workforce is employed in the informal economy, characterised by low productivity and under-compensation. The recent global economic fragmentation and roll back of progress in international free trade have intensified the challenges facing the workers, leaving many in state of uncertainty with limited upward mobility. It has led to stagnating wages, and a lack of opportunities for the young joining the workforce.

The quality of employment remains a major concern. Many lack proper exposure to quality education, options for skill upgradation, and secure employment opportunities. This gap poses a serious threat of converting the demographic dividend into a demographic liability. In order to optimise the contribution of our young labour force to country’s long-term economic progress, we will have to improve the quality of employment, raise productivity, and increase access to education and training. These are not economic imperatives but a moral duty towards our youth, the future of our nation.

Key Statistics on Gender Gaps in the Workforce in India, 2023

In addition, the female labour force participation rate in India remains one of the lowest among major economies. Despite rising educational attainment among women, social norms, lack of secure employment opportunities, wage disparities, and inadequate childcare support continue to restrict their participation in the workforce. Structural barriers, such as limited access to skilling programs and workplace safety concerns, further discourage female workforce engagement. Increasing women’s participation in the labour market is not just a social issue but an economic necessity. Unlocking this potential could significantly boost India’s GDP and drive sustainable development.

The Human Side of India’s Population Conundrum

Behind these statistics are human narratives that define the broader systemic challenges involved in meeting our obligation to the next generation.
Our demographic profile is not uniform for the entire country. India exhibits significant fertility rate variations across regions, socioeconomic groups, and educational backgrounds. These differences have profound demographic, economic, and social implications, shaping migration patterns and potentially fueling social tensions.

Fertility rates in India vary widely between the northern and southern states. The Total Fertility Rate (TFR) in southern states like Kerala, Tamil Nadu, and Andhra Pradesh has already fallen well below replacement level (2.1 children per woman), largely due to higher female literacy, better healthcare access, urbanisation, and stronger family planning adoption. In contrast, northern states such as Uttar Pradesh, Bihar, Jharkhand, and Madhya Pradesh continue to have higher fertility rates, exceeding the replacement level.

A similar divide exists between various socio-economic groups. Women with higher levels of education tend to marry later, have fewer children, and participate more actively in the workforce. On the other hand, low literacy and lack of awareness in less-educated households contribute to early marriages and higher fertility rates, perpetuating cycles of poverty and limiting women’s autonomy in reproductive choices.

The stark fertility divide across regions and socioeconomic groups could lead to social and political tensions. As the population in northern states grows faster than in the south, concerns about economic disparities, political representation, and resource allocation may intensify. Southern states, which have successfully reduced their fertility rates and are experiencing slower population growth, may feel disproportionately burdened by fiscal transfers and policies that favor more populous northern states. Additionally, differences in family structures, gender norms, and economic aspirations could create cultural rifts, shaping perceptions of development and social progress.

The demographic imbalance between high-fertility and low-fertility states is already driving large-scale migration. With declining working-age populations in the south and labour surpluses in the north, economic migration from northern to southern states is set to increase. Cities like Bengaluru, Chennai, and Hyderabad are already witnessing an influx of workers from Bihar, Uttar Pradesh, and Odisha, driven by job opportunities, better wages, and improved living conditions. While migration helps balance labour shortages and promotes economic integration, linguistic, cultural, and social tensions between migrants and native populations may arise, requiring thoughtful policy interventions to ensure smooth integration.

India’s fertility divide is reshaping the country’s demographic landscape, influencing economic growth, migration trends, and social cohesion. Addressing these disparities requires investment in education, women’s empowerment, and equitable resource distribution, ensuring balanced development across regions. While migration can serve as an equalising force, proactive policies are needed to manage cultural assimilation and economic integration, preventing demographic imbalances from translating into deeper social fractures.

Tapping the Demographic Dividend

For India to tackle this demographic change effectively, the application of a multidimensional approach catering to many issues of this trend is needed:

1. Education and Skill Development
   The foundation of our strategy requires a revitalised emphasis on education and skills building. The urgent need is for deeper reforms in our education system in terms of improvement in quality, relevance, and access. Beyond the emphasis on rote-learning, we must focus on developing critical thinking, problem-solving skills, and vocational competencies in harmony with industry demands. Age specific data is clear in demonstrating that disparities persist in educational attainment levels, amongst youth aged 20-24 just 47% of young women and 53% of young men have completed higher secondary or college education by 2019-21., though it is markedly higher than the levels of 2015-16. The lack of large proportions of youth entering tertiary or vocational education has been flagged time and again.
   Technical and vocational training needs to be expanded and better integrated with industry demand. Our Industrial Training Institutes (ITIs) and polytechnics have to be modernised with fresh curricula and equipment. Education and industry need to be coordinated so that the training courses keep abreast with the changing market needs. Technological skills and digital literacy should be part and parcel of our educational system. With the global economy increasingly turning to automation and artificial intelligence, it is only fitting that our labour force learns to adapt and thrive in such a changing environment.
   
   
2. Generation of Employment and Quality Improvement
   Creating adequate jobs for our expanding labour force requires a multi-faceted strategy. Job-intensive industries like manufacturing, construction, tourism, and healthcare need policy intervention to increase their employment absorption capacity.
   The formal sector needs to be expanded by regulatory changes that facilitate compliance for firms without compromising the safeguards required for employees. Small and medium enterprises, which generate employment for the majority of our workforce, need to be given special focus using focused financial support, technology upgrade support, and market link support. In addition to the creation of jobs, we also have to help improve the quality of employment. This involves improving the quality of the working environment, social protection coverage, fair remuneration, and opportunities for professional development. Improved quality employment enhances the well-being of people while increasing output and economic development.
   
3. Women’s Economic Participation
   Increasing women’s participation in labour force would have to be addressed through broad strategies such as cheap and safe childcare, flexible working hours, safe transport, safety from workplace harassment, and the removal of discriminatory promotion and hiring policies. We would also have to work towards changing social attitudes and norms that limit women’s economic roles.
   Increasing women’s participation in the workforce could contribute between 1.5-2.0 percentage points to the annual GDP growth of India and hence be among the most valuable interventions for inducing economic growth.
   
   
4. Health and Social Welfare Systems
   A productive workforce is determined by a healthy workforce. We need to increase access to quality healthcare services, prioritising preventive care and the management of non-communicable diseases that increasingly plague our working-age populace.

Population Covered by Social Protection Floors/Systems-India, 2023

Additional concern is with our population ageing, building strong social security systems is more vital than ever. Pension coverage has to be extended to informal workers beyond the formal sector. Health insurance programs have to be made stronger and universalised to cover households against catastrophic health spending. The social protection initiatives outlined above are beyond the ambit of welfare policies; instead, they are strategic human capital investments that support productivity and increase social stability.

Older Population Covered by Social Protection- India, 2023

5. Urbanisation and Regional Development
   With increasing numbers of people migrating to cities, planned urbanisation is the need of the hour. We need to build tier-2 and tier-3 cities as growth centres to decongest metros. Urban infrastructure, housing, transport, and basic services need to be invested in for this.
   At the same time, it is necessary to ensure balanced regional development through targeted interventions in less developed regions. Special focus should be given to states with high population growth rates and limited economic opportunities, particularly in the northern and eastern parts of India. Addressing the regional imbalances requires investment in education, women’s empowerment, and equitable resource distribution. While migration can serve as an equalising force, proactive policies are needed to manage cultural assimilation and economic integration, preventing demographic imbalances from translating into deeper social fractures.
   

The Way Forward: A Call for Firm Action

For India, the stakes are extremely high, and time is running out. The demographic bonus is a finite window of opportunity to accelerate our economic change, but the opportunity will not be available for eternity.

I think that achieving this demographic potential to the fullest requires a new national commitment that transcends political boundaries. The challenge requires the collaboration of all levels of government — national, regional, and local—and an active role from the private sector, academia, civil society organisations, and community leaders.

We need to meet this test with the same urgency and national resolve that we used in our response to the 1991 economic crisis. The reforms we launched then transformed the the same firm and powerful action to ensure that our demographic dividend pays rich dividends to our economy and society.

From Demographic Dividend to Development

As we pass through this time of change in the development of our country, we must recognise that the ultimate test of our success will not be in terms of aggregate economic figures but in terms of the overall welfare and increased opportunities presented to all Indian citizens.

The demographic dividend that we enjoy represents not just an economic opportunity but also a heavy responsibility towards the youth. Each young person in India has legitimate aspirations for a better life—dignified work, proper healthcare, quality education, and social security. Our initiatives and policies must be designed to address these aspirations.

If we succeed in this endeavour, the coming decades will see India transitioning into a developing nation of long-term and broad-based prosperity. If we don’t succeed, we risk failing the aspirations of millions of Indians, condemning them to lives of underemployment, insecurity, and unfulfilled potential.

The choice that faces us is inescapable. The time for reflection is past; we are at a point that demands firm, thought-out, and timely decisions. India has to become rich before it becomes old. Our common future hangs on this necessity.

As I have emphasised throughout my professional career as an economist and a public servant: economic growth is not an end in itself but a means to improve the quality of life of all citizens. Let this simple principle guide our approach towards the demographic dividend.