Is India's demographic dividend over?
India's relative youth has set it up for demographic and economic opportunities. But what is the demographic dividend, and is India still in a position to take advantage of it?
The term 'demographic dividend' is often used to describe the unique demographic opportunities that favour India. We look at historical data as well as projections for the future for India's population by age group to consider whether India's demographic window to achieve that dividend is still open.
In an influential 2003 book, the economist and demographer David E Bloom and his co-authors coined the term 'demographic dividend' to refer to a boost in economic growth that a country with a large share of its population in the working age can expect to benefit from, provided the right policies are in operation.[1] The term is now widely used in demographic, economic and public policy discussions.
The demographic dividend comes not just from the size of the working-age population, but, more importantly, from its relative share in the total population. In economic terms, both the young and the elderly require welfare investments and resources, while the working-age population is the only section able to generate resources and propel growth, the authors suggest. The demographic moment at which a country's child population begins to decline, its working-age population is large, and its elderly population has not yet substantially grown can set the stage for this dividend.
Declining child population
India's population growth began to slow down from the 1980s, driven by falling fertility rates. Birth rates in India have been declining steadily over time, and India is now below replacement fertility of 2.1 - Indian women of reproductive age today are expected to have fewer than 2.1 children on average in their lifetimes. 'Replacement fertility' means that if two adults have a notional 2.1 children between them, then, accounting for some likelihood of death during childhood or adolescence, that couple will produce two adults, and the size of the population will remain the same. This is a key milestone in a country's demographic journey. If fertility falls below that level, the population will begin to decline in absolute numbers.
As a result of this decline in birth rates, the absolute number of babies born every year in India began to decline from the early 2000s. The number of babies born every year in India peaked at around 29 million at the turn of the millennium, following which it began to fall. Roughly 23 million babies are now born each year, and this number is projected to continue to fall.
What this has meant is a sharp decline in India's child population, which in demographic terms is defined as the population aged 0-14 years - in both absolute and relative terms.
India's child population began to steadily decline from around 2010 onwards. At its peak, India had nearly 390 million children between the ages of 0 and 14 out of a population of 1.24 billion people at the time. If the country were to be divided into 15-year age-groups, it was the child population that was the largest segment at the time.
India's child population is now down to 354 million, lower than the number of 15-29- year-olds, and nearly the same as the population of 30-44-year-olds.
In relative terms as well, the share of children in India's population is declining. In the early 1960s, over 40% of India was under the age of 14. By 2025, under 25% of India, or less than a quarter of the population, is now under the age of 14, and this proportion is projected to continue to decline.
Despite the differences in the socio-economic and demographic conditions of Indian states, the decline in the child population in both relative and absolute terms is taking place across the country. Bihar is the only state that is not projected to see its child population decline in absolute terms up until 2036, the furthest year for which we have projections.
Peaking working-age population
The share of Indians who are aged 15-60 years - what is defined as a 'working-age population' according to Indian demographic and labour statistics[2] - currently make up over 60% of India's population.
However, the working-age population is approaching its peak, suggesting that the demographic window for India is now approaching its closing date.
The share of Indians who are of working age will peak in the next three to four years according to UN population projections, after which it will begin to decline.
In absolute numbers, the working age population is projected to peak at around 1.04 billion people between the ages of 15 and 60 by around 2040, after which it is projected to begin to decline.
Burgeoning elderly population
Seniors over the age of 60 make up 11% of India's population as of 2025, but this population is growing rapidly as a result of improved life expectancy. In states like Kerala, people over the age of 60 already make up nearly 20% of the population.
After 2050, the only population group expected to continue to grow in size is the population above the age of 60. In another two decades, there will be more seniors over the age of 60 than there will be children in India.
The growth in the elderly population is also what will drive the rise in India's dependency ratio - the share of dependents in the population to its working age population.
[1] The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change (2003), David Bloom et al, RAND Corporation
[2] In international definitions, the working age population is usually 15-64 years. However in Indian national statistics, the usual definition of the elderly is those at or above the age of 60, and the working age population is those between the ages of 15 and 59.
