Population conundrum | The Financial Express

Population conundrum

China’s population decline may throw up opportunities for India, but there are lessons to be learnt

population, chinese population
China’s demographic challenges mean that its economy’s growth momentum could begin to dip soon. (Reuters)

China has reported a population decline for the first time since the 1960s. Its population in 2022 stood at 1.41 billion—almost 0.85 million lower than the year before. The decline, experts believe, will exacerbate the demographic challenges that the country is already facing—a ballooning population of the aged, a shrinking workforce, and a birth rate that just isn’t picking up after the one-child policy that was in place since the 1980s ended a little over half a decade ago. The elderly make up a fifth of the country’s population today and are expected to reach 40% by 2050. In comparison, India is in a better place — while the share of the elderly in our population is expected to rise, it will only reach 33% by the end of the century. China’s demographic challenges mean that its economy’s growth momentum could begin to dip soon. The economy, thanks to the draconian zero-Covid restrictions and other systemic issues, is already projected to have fallen to 3% in 2022, and ending the zero-Covid policy without the requisite preparation in terms of healthcare capacity and wider choice of effective vaccination will take its own toll on economic growth.

With the supply of workers dwindling, productivity growth would need to pick up at an unprecedented rate if the growth momentum is to be maintained, but that seems an uphill task in the years ahead, given that close to half of the Chinese population is still low-income. This means the quantum of investment needed to boost productivity to the levels needed through improved health, educational, and social outcomes will be commensurately higher. At the same time, the country’s social security system will likely come under strain as the working age population declines and there are fewer younger people contributing to the pension pool and the building of health care infrastructure while the demand-side sees an expansion. China’s demographic challenges and the potential adverse effect on the economic growth of the country will have obvious implications for the global economy, more so given the country’s continued relevance in the global supply chain. Some, however, see a silver lining as a falling Chinese population will have a positive impact on the planet’s environmental health. But that is a debatable conclusion with rapidly increasing national population elsewhere.

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Some experts are betting on India to assume the mantle of the powerhouse of the global economy in the decades to come. There are demographic tailwinds, as India’s population—to be larger than China’s this year —is expected to remain young for a longer period. And it is the fastest-growing economy at present. But that alone won’t be enough. At the moment, India’s low-income and poor population is much larger than China’s, and accounts for a massive chunk of its overall population. As per a Bloomberg analysis of major economies globally—based on OECD, World Bank and Chinese government data—it also has one of the worst rates of youth unemployment. Skilling remains a major challenge, with less than half of India’s educated youth considered employable, as per the India Skills Report 2022, and the skills gap, especially of digital skills, presenting a much larger risk to growth compared with other major economies. Policies and efforts to harvest the demographic dividend must also account for the regional divides. India’s baby boom is mostly concentrated in the poorer states in the north and the east, while the richer southern states are ageing at a faster clip. The demographic dividend that India can theoretically enjoy in the future could very well turn into a demographic disaster without timely investment, and at scale, in education/skilling, nutrition, and health.

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First published on: 20-01-2023 at 04:15 IST