Population growth and Economy

Context: Moody’s Investors Service released a report stating that although India’s population growth could expand its labor force, this alone wouldn’t suffice to strengthen the economy or enhance fiscal outcomes due to the country’s education quality. The report emphasized the importance of improved education to prevent job losses from technological advancements in sectors like call centers. 

Moody’s compared India’s education with Pakistan and Bangladesh, noting the need for quality education and infrastructure for economic benefits. The report highlighted India, along with other nations, contributing significantly to global population growth and workforce increase. It also pointed out educational disparities between these countries and their peers. Lastly, the report highlighted gender-based education gaps in India and Bangladesh.

The relationship between population growth and economic growth is complex and multifaceted. Economists and researchers have debated this topic for years, and the consensus has evolved over time. The relationship can vary depending on the specific context, the stage of development of a country or region, and various socio-economic factors. 

From the Point of View of UPSC mains syllabus, this is a very important topic. 


  • Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.

So in this article, we are going to cover the following:

  • Relation between population growth and economic growth (For general understanding)
  • Factors responsible for India’s population growth
  • Challenges caused by growing population
  • Way ahead to harness the benefits of population growth 

Relation between population growth and economic growth:

  • Population Growth as a Driver of Economic Growth (Early Stages)
    • A larger population means a larger labor force, which can lead to increased production, consumption, and innovation. This phenomenon is often referred to as the demographic dividend. When the ratio of working-age individuals to dependents (children and elderly) is high, it can create a favorable environment for economic expansion.
  • Labor Force and Human Capital:
    • A growing population can provide a larger labor force, which, if properly educated and skilled, can contribute to higher productivity and economic growth. However, for population growth to positively impact economic growth, there must be adequate investments in education, healthcare, and skill development to ensure that the workforce is productive and capable of contributing to economic activities.
  • Consumption and Demand:
    • A larger population can lead to increased consumption and demand for goods and services, which can stimulate economic growth. Businesses may expand to meet this increased demand, leading to higher levels of investment and production.
  • Urbanization and Productivity:
    • Population growth often leads to urbanization, as people move from rural areas to cities in search of better opportunities. Urbanization can lead to increased productivity due to factors like economies of scale, improved infrastructure, and better access to markets and resources.
  • Resource Constraints and Negative Impacts:
    • Rapid population growth without corresponding economic development and resource management can lead to resource constraints, environmental degradation, and increased competition for limited resources. This can have negative effects on economic growth in the long run.
  • Demographic Transition:
    • As economies develop and standards of living improve, birth rates tend to decline. This results in a shift from high population growth rates to lower ones. During this demographic transition, countries can experience a period of accelerated economic growth due to a relatively smaller dependent population.
  • Aging Population:
    • In more advanced economies, declining birth rates and increased life expectancy can lead to an aging population. While this may result in a decline in the working-age population, it can also create opportunities for innovation and growth in industries related to healthcare, elderly care, and technology.
  • Quality of Institutions and Policies:
    • The relationship between population growth and economic growth is influenced by the quality of institutions and policies in place. Good governance, effective healthcare systems, education policies, and infrastructure development play a crucial role in determining how population growth impacts economic growth.

In summary, the relationship between population growth and economic growth is not deterministic, and its effects can vary widely based on numerous factors. While a growing population can potentially provide a demographic dividend and contribute to economic growth, this positive outcome depends on factors such as investments in human capital, infrastructure, and sound governance.

Additionally, as countries progress in their development, the relationship often becomes more nuanced, with demographic transitions and changing population structures influencing economic dynamics.

Factors responsible for India’s population growth

  • Falling mortality: The IMR has decreased from 40.7 in 2015-16 to 35.3 in 2019-21.
  • Increasing Life expectancy at birth: It reached to 69.7 years in the 2015-19 period from 31 in 1947.
  • Unintended pregnancies: 1 in every 7 unintended pregnancies of world occur in India.
  • Lack of female education, child marriage and early marriages, etc.

Challenges caused by growing population

  • Pressure on resources: As India has only 2.45% of the global surface area and 4% of the water resources. 
  • Pandemic outbreaks: Due to increasing urbanization and expansion of humans in wild habitats. 
  • Disruption and Conflicts: Due to rise in struggle for finite resource. 
  • Decline in social indicators: Due to suboptimal public expenditures on health and education may not be possible. 
  • Pressure on economy: Due to low skilled workforce, stagnant economy, unemployment, etc.
  • Widening gender gap: If expenditure on health and education decline, women would suffer the most.

Way ahead to harness the benefits of population growth 

  • Supporting Reproductive Justice: Provisions of safe and effective methods of family planning and freedom to make the best reproductive choice. 
  • Education for all: Educational attainment, particularly of girls, enhances intergenerational formation of human capital and has a positive impact on demographic behaviour with respect to nuptiality, fertility, health, etc. 
  • Foster Inclusive Growth developing democratic institutions to facilitate equity in the society. 
  • Facilitate migration to bridge the demand and supply of the workforce. 
  • Investment in green technology and social innovations to adapt to and mitigate climate and environmental changes. 
  • Better geriatric care, health insurance and pension facilities for 65+ age category.

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