According to the United Nations (UN) population estimates, this year, the population of India surpassed or will surpass that of China. Since 1950, the year the UN began keeping track of population data, China has been the most populous country. In the forthcoming decades, perhaps even centuries, this position will belong to India.
A key question that has resurfaced in this background is whether the large population is the bane of the Indian economy or boon for it.
Two relevant questions
In answering this question, the common practice is to compare India to China. But this is wholly misleading since the policy histories of the two countries are vastly different, China is a much richer country today than India. This means that even if it is at a disadvantage purely in terms of the composition of its population - for example, those 65 years or older make 13% of its population against only 7% of India's - it may be better placed to take care of its elderly.
The right way to pose the question therefore is not a comparison with China but to ask whether on a net basis a younger and larger population is more beneficial than an older and smaller population for the country.
These are two distinct questions with the first relating to the composition and the second to the size of the population. As such, they must be considered separately in succession.
Young demography helps
It should be relatively uncontroversial that the advantages of a young population far outweigh its disadvantages. First, a younger population translates in a proportionately large workforce and therefore higher gross domestic product (GDP) given the technology and volume of capital available.
Second, given that the young save more than the old, a younger population also translates in higher saving and therefore higher investment. The higher investment further adds to the GDP. Finally, a younger population brings greater energy and vibrancy to a nation, leading to more innovation and its greater exploitation.
A concern commonly expressed about a younger population is that it leads to greater unemployment. But the unemployment rate depends on policies, which surely do not depend on the age composition of the population.
Underemployment challenge
Factually, the unemployment rate in India has been consistently low in the 3-5% range. As I have argued in numerous writings, unemployment is not India's problem, it is underemployment. On this score, the output per worker has seen a clear rising trend (meaning declining underemployment) alongside rising workforce in the post-reform era. What is needed is acceleration in this trend. That in turn required further policy reform, not the older population.
Turning to the size question, I would argue that the benefits of a larger population also far outweigh its costs. There are vast benefits arising from economies of scale in the provision of public goods. Takes, for example, India's digital infrastructure. Once this infrastructure is created, it is there for all to use.