Opp Mounts Pressure For Session

This week India's population crosses the one billion mark. With poverty still visible all around, the milestone is an occasion for soul-searching and refocusing on policies that will both curb further (there has been some progress in the nineties) the rate of population growth and raise GDP growth. But recent research has shown that there is a positive side to high population growth, provided the opportunity implicit in it is grasped by putting in place appropriate policies that will derive the maximum benefit out of the demographic developments.

The old belief that high population growth makes for lower per capita income growth and thus works against the removal of poverty has been replaced by the realisation, on the basis of statistical evidence, that aggregate population growth does not have any impact on economic growth. More than the aggregate growth rate, it is the composition of the population that matters. When death rates fall, there is first a rise in the population of young dependents, then this bulge travels up to the population in the working age group and finally there is a steady rise in the proportion of the aged in the population. There is a window of opportunity for maximising growth during the phase when the proportion of the population in the working age group is maximised.

The developed economies led by Japan, are in the third category and having to seriously worry about how they can afford the national pension bill. Correspondingly, the East and Southeast Asian economies owe a good part of their phase of rapid economic growth to the rise in the proportion of their population in the working age group. But they will peak one by one, with China bringing up the rear by continuing to be in the high growth phase till 2020. On the other hand, South Asia will remain in that phase even till 2025.

The growth rate of the Indian population, currently at 1.85 per cent per annum, is projected to go down to 1.45 per cent in the 2006-2016 decade, to touch 1.26 billion. But by then the age composition of the population will have changed. The population below 15 will be down from 37.7 per cent in 1996 to 27.7 per cent, 60 and above will be up from 6.7 per cent to 9 per cent, but there will also be a dramatic shift in the proportion of the population in the 15-59 age group -- from 55.6 per cent to 63.3 per cent. In that year there will be a staggering 800 million Indians of working age. This is a great challenge and opportunity as statistical evidence suggests that for every 1 per cent rise in the population in the economically active age group, GDP grows by 1.5 per cent.

The problem is in the initial period of this phase of transition, more job seekers will be joining the job market than there will be additional jobs. This will lead to a rise in unemployment, as has been the case in India during 1994-97 wh