Background In the 19th century, though the longevity of human beings was low, the world population was growing due to a high birth rate, inadequacy of birth control measures and family planning awareness. Inadequate development of life sciences and life saving drugs kept the death rate also high. Due to malnutrition and insufficient child care, infant mortality was high too. Diseases and epidemics were common and treatment thereof was not adequately effective. As a result, population growth remained under control and nature was keeping its balance. Then emerged an era of inventions across various science streams; and medical science developed rapidly. Research could conquer many of the dreaded diseases such as cholera, plague, small pox, leprosy, tuberculosis etc; which were some of the major causes of shortening of human life expectancy. They were the causes of mass scale deaths. Due to invention of various vaccines, the diseases could be immunized. Many of them could be cured by advanced medicines invented. Quality of healthcare improved and even medical infrastructure advanced significantly. This reduced the large scale human life destruction and life expectancy increased sharply. Currently, the highest life expectancy of 84 years is in Japan.
India and other countries
Similar phenomenon prevailed in India as well though the numbers were poor. The steady rise in the life expectancy rates in India can be visualised by the table below:-
Over the last few decades, some new epidemics/ contagious diseases such as swine flu, bird flu, dengue etc. have emerged causing danger to human life. Death tolls have also increased due to cancer and AIDS. However, modern research has substantially reduced their rigour and it is expected that soon some solutions will be invented to manage them, if not fully overcome them. Even after the emergence of new types of diseases, the life expectancy has increased decade after decade across the world and it is at the highest level as of now. Further, due to consumption of better quality food and water, supported by inventions in medical science, there is every possibility that life expectancy will continue to climb up. Many developed countries have a life expectancy of more than 80 years and even many developing countries have a life expectancy of more than 70 years.
Economic effect of longevity of life
The modern medicines and methods of treatment have increased the life expectancy but the working life of a human being has not increased proportionately. In many countries, on an average, a person starts working at the age of around 20 and retires at the age of around 60. In many developed countries, the working life is longer, and people work till the average age of 65 years. This is on account of shortage of labour and better health conditions due to less polluted environment and better quality food. The life of a human being after retirement, which is generally less productive, is becoming longer due to better life expectancy. Many retired senior citizens, though generally wealthier than others, especially in the developed countries; cannot meaningfully contribute to the GDP of their nation. However, many nations have to incur substantial costs for them by way of provision of social security, pension, free or subsidised medical facilities etc. A human being in a developed nation works and actively contributes to the GDP for about 45 years in his lifetime. With life expectancy advancing above 80 and the retirement age not advancing beyond 65 years, the proportionate working years in the life cycle of a person has reduced. In a country, certain people are not able to work because either they are handicapped or unwell. In many societies, women do not work for commercial consideration and many of them are off work due to pregnancy, child care or family issues. The longer life span of human beings is increasing the percentage of non-working population in many countries and especially in developed countries, which is becoming a matter of concern.
Working Population ratio
The following statistical data can be an eye opener as to what percentage of the population in a country is working to contribute to its GDP. The working population percentage is more in the developed countries, which has less young population as compared to the developing countries.
Developed countries are facing one more problem mainly due to the change in lifestyle emerging from economic development. In the modern developed society, the age for getting married is increasing. The educated new generation is getting married at a much later age than earlier. Many of them even prefer not to get married and stay single. While this is happening, human anatomy has not changed.
The fertile age of females has remained the same and therefore the reproductive years available after late marriage are getting reduced. Further, work related stress is causing frigidity and disorders. This is resulting in birth of less than two children per couple in many developed countries. As a result, the population of developed countries has started reducing. To make the position worse, a larger part of the population is ageing and is not able to contribute to the GDP of their country. The social welfare expenses are on the rise and have become a significant cost in developed economies. The young citizens need to bear a larger portion of the economic burden of the society. This is resulting in increase in taxes and tax rates, increase in borrowings of the nations and slowing down of their economic growth.
Stagnating GDP of developed countries
Japan is one of the major examples of this phenomenon in the world. Over the past 20 years, the population of Japan is not growing much. The life expectancy as well as average age of the Japanese population has increased year after year. The working population in that country is gradually shrinking. In spite of innovation, technology growth and other facilitators; the GDP of the country has stagnated and possibilities of its turnaround are nowhere in sight. A number of economic stimulants have been applied by that country but they are not able to provide the desired results. Inflation has remained very low as the domestic demand is not increasing adequately due to stagnation. Spending capacity of the population remains high but the overall spending is not growing much. Its currency has been gradually strengthening, reducing the competitiveness of its exports. As a result, the economy has stagnated and China has overtaken this economy pushing it to the third place.
Since the last recession in Europe, the developed countries therein are facing problems in gaining growth momentum. Their economies are stagnating and in spite of efforts by the European Central Bank, the required traction is not materialising. Quantitative Easing, which has been successful in reviving the US economy, is being applied in a larger dose in Europe and only time will tell how far can it be effective. The population in the European Union is also aging. The birth rates are low and they are much less than two children per couple. A birth rate of 2.1 per couple is needed to keep the population level intact and the European growth rate of 1.6 per couple can result in substantial reduction of population, unless sizable immigration from other countries is encouraged.
Migration
Due to added longevity, the percentage of working population in many countries in Europe is getting reduced. Though, of late, there is migration from Eastern Europe to the Western European countries, the overall effect is not very significant. Europe is not systematically adding population from countries across the world as is being done by the US, Australia, Canada and New Zealand. For an economy, which has a low or negative population growth, it is desirable to add on young population from other countries, who can keep the demographic balance in the current era of high life expectancy. In the absence of such an induction, the economy can stagnate as has happened in Japan. In this connection, the following tabulated data of various countries in 2013 can be an eye-opener.
After the last recession, the US has performed reasonably well and its turnaround has been one of the fastest amongst the developed countries. One of the reasons for the same is that the country is constantly taking in immigrants from all over the world. The immigrants accepted are mostly highly educated intellectuals. This has kept the country ahead of the rest of the world in research, technology, education and even entrepreneurship. Though the original population is aging, newly added immigrants are keeping the overall demographic balance and therefore the country is expected to remain on the growth path for the years to come.
Chinese Situation
The single child policy per couple, which was adopted in China since 1980, had initially given good dividends. The population pressure on the country has eased over a period of time. The economy grew well for a number of decades and the per capita income kept on rising. The affluence in the Chinese middle class increased substantially and the standard of living improved. However, the Government could have eased the policy atleast after 25 years of its implementation. The continuation of the policy longer has started showing its negative effects. As the birth rates dropped, the working population could not keep pace in the country. If the policy would not have been changed in 2013, it could have resulted in social and economic imbalance. Still, over the years, the low population growth has depleted the potential labour force of the country. It has started increasing the labour cost in China. This can disturb the manufacturing advantage of the country over the rest of the world and can further slowdown its growth rate. This demographic imbalance cannot be cured overnight and the Chinese Government realised the same probably a bit late. Easing of the one child policy will not yield any immediate results. The well educated and rich Chinese population is very likely to have negative growth due to the same syndrome as prevalent in many developed countries of the west. This may cause a serious threat to the Chinese dominance on global mass manufacturing. If balanced corrective actions are not taken by the country, it may even face economic stagnation like Japan after a couple of decades.
The Chinese population is developing one more peculiar problem. The working couples born in the one child policy regime need to take care of four of their aging parents. The Chinese culture being traditional, parents are actively looked after by their children to the best possible extent. The couples are ending up spending their considerable personal time with doctors, in hospitals and at homes of their parents to take care of their health issues. Each of these couples has only one child. The child has four grandparents. Their affection to the child is in a way pampering the child to undesirable levels, spoiling his habits. These children are quite likely to inherit considerable wealth from their parents and four grandparents. This fact makes their future secured but the initiative for hard work is being lost. The new generation in China is more educated and savvy. They are more competitive and ambitious. This has resulted in late marriages and a resultant large number of single population, which may further disturb the demographic balance. The one child policy and the social structure in China have also skewed the demography resulting in a higher male to female ratio, which is not a healthy sign. These developments are likely to affect the Chinese economy and its growth rate in the years to come. The great era of sustained growth may be over for that country mainly due to this demographic imbalance. The economy may continue to slow down causing concerns to it as well as to the overall global growth for the years to come.
Demographic dividend for India
Contrary to most of the other countries of the world, the demography of the Indian population is very much favourable. The current age group of population in India is as under:
It can be observed that India harbours a large young population, which will join the workforce in the next 20 years. India is spending a substantial amount on education and skill development and the allocation is expected to increase in the years to come. Therefore, more and more population joining the workforce will be skilled. India has already acquired a reputation for its ability to deliver high skill services. The Government is stressing on the importance of increase in export-oriented manufacturing in the country. If right types of reforms are carried out, this dream has a potential of materialising into a reality especially as China may be losing its edge. Availability of a large young population, which is undergoing various types of education and skill development, will complement this goal. The young and educated Indians can make the country grow at a faster rate than most of the other countries in the world. The country can even achieve double digit growth in the years to come. Though India had taken a lenient approach over population control which had a negative impact on per capita income and welfare of its subjects, its current demography can pay a rich dividend to the country, over the next couple of decades. That does not mean or imply that India should remain lax about population control. Overpopulation can create lot of negatives for an economy and imbalances which can take a long time to correct. However, the current population status and mix in India, appears to be favourable, as most of the developed world is facing problems of ageing population.
In the next twenty years, the skilled and semi-skilled population joining the workforce will make the GDP of India grow faster and her per capita income can soar. There is a considerable unsatiated demand in the country for goods and services. More money in the hands of the population will boost the demand and result in a robust domestic market. The opportunity is great and it can make India the third largest economy in the world over the next couple of decades. Though the domestic climate is conducive for growth, the future very much depends on Government initiatives. If adequate steps are taken to speed up reforms and controlled capitalism is well supported, a golden era for the country can usher. However, if there is any policy lag, it can result in large unemployed and underfed population. If jobs do not get created at the same speed at which the younger generation is aspiring and joining the workforce, it can create social unrest and economic problems.
Today is the time for great opportunities for India, but it is laden with inherent risk. The Government will need to handle the situation carefully with a result-oriented approach. The next two decades for India can be great and most of us may be fortunate to witness this era.
