Economics of India’s Population Growth

Why In News

• Recently it was announced that India overtook China as the world’s most populous country. According to the estimates of the United Nations, in April 2023, India’s population reached 1,425,775,850 people.

History of India’s population

 

 

Population vs Economic development

• Starting point of this debate is Thomas Malthus’ argument in 1798.
  • Malthusianism is the theory that population growth is potentially exponential while the growth of the food supply or other resources is linear, which eventually reduces living standards to the point of triggering a population decline. This event, called a Malthusian catastrophe.
  • Since then, however, the world population has grown eight times to reach 8 billion.
• During the 1950s and 60s, “the general view of economists was that high birth rates and rapid population growth in poor countries would divert scarce capital away from savings and investment, thereby placing a drag on economic development.
• However, between the 1970s and 1990s, several studies “failed to detect a robust relationship between national population growth rates and per capita income growth”
• The global view reverted in the 1990s when researchers again found a clear “negative association between population growth and economic performance”.
  • During this time, World was also introduced to the concept of “demographic dividend” i.e., high economic growth when there is a bulge in the working-age population (roughly speaking, population between 15 and 65 years).

Demographic Dividend

According to United Nations Population Fund (UNFPA), demographic dividend means, “the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older)”.

 

 

In Indian Context

• Opportunities for India:
  • Theory of demographic transition suggests that population growth is linked to overall levels of economic development as more people are able to produce more goods.
  • According to the Economic Survey 2018-19, India’s demographic dividend will peak around 2041, when the share of working-age ,i.e. 20-59 years, the population is expected to hit 59%.
  • The rising young population (>66 % population in 15-59 age) provides India with a great opportunity for growth, peppered with the possibility of path-breaking innovation.
  • India’s population heterogeneity ensures that this window of demographic dividend becomes available at different times in different States.
  • Farming and industry will be able to benefit from economies of scale.
  • It will lead to higher tax revenues which can be spent on public goods, such as health care and environmental projects.
  • The size of the population is intimately connected to the global power dynamics shaping the relationship between nations and regions.
• Issues with population:
  • The increase in the working-age population may lead to rising unemployment, fuelling economic and social risks.
  • High population growth also affects the faster depletion of resources.
  • The 65+ category is going to grow quite fast i.e., increase from 8.6% now to 13% by 2030.
  • If India is unable to reap demographic dividend, it will become a demographic disaster.

Lessons for India

• India’s fertility rate (the number of children per woman) is already below the replacement rate of 2.1 but the population will peak by 2064.
• The bigger challenge now is to figure out how to best use India’s demographic dividend because despite China growing at remarkably high over the past four decades it may become old before becoming rich.
• Countries like Singapore, Taiwan and South Korea have already shown us how demographic dividend can be reaped to achieve incredible economic growth by:
  • Increasing women’s participation in the workforce. As of 2022,29.4 % of women were working or looking for work, down from 34.1% in 2003-04.
  • Investing more in children and adolescents, particularly in nutrition and learning during early childhood.
  • A greater focus needs to be on transitioning from secondary education to universal skilling and entrepreneurship, as done in South Korea.
  • Health investments – Evidence suggests that better health facilitates improved economic production.
  • Making reproductive healthcare services accessible on a rights-based approach. We need to provide universal access to high-quality primary healthcare.
  • India needs to address the diversity between States. Southern States, which are advanced in demographic transition, already have a higher percentage of older people.
  • A new federal approach to governance reforms for demographic dividend will need to be put in place for policy coordination between States on various emerging population issues such as migration, ageing, skilling, female workforce participation and urbanization.

Conclusion

• India has a window of opportunity to reap the benefits of demographic dividend until 2040s otherwise it could become demographic liability or demographic disaster.

 

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World Trade Organisation

Context

India appealed against a ruling by the dispute settlement body at the World Trade Organization (WTO) that India violated its zero-tariff commitment under Information Technology Agreement (ITA).

 

WTO

It is an intergovernmental organisation that regulates and facilitates international trade. Marrakesh Agreement (1994) replaced General Agreement on Tariffs and Trade (GATT) that was established in 1948. WTO began operations on 1st January, 1995.

GATT was established for substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis. Its history can be traced to Bretton Woods Conference.

 

 

Ministerial Conference is the highest authority of WTO. Representatives of all WTO members together form the Ministerial Conference. MC must meet at least every two years.

General Council has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years.

Dispute Settlement Body: To oversee the dispute settlement procedures.

Trade Policy Review Body: To conduct regular reviews of the trade policies of individual WTO members.

 

Dispute settlement Mechanism in WTO

The Dispute Settlement Body consists of a Chairman and representatives of all WTO members (usually government representatives). When the parties are not satisfied with the decision of the panel report, then either of the parties may appeal to the Appellate Body. The Appellate body consists of seven persons. But only three of them shall serve in one case.

The term “plurilateral agreement” is used in the World Trade Organization. A plurilateral agreement implies that WTO member countries would be given the choice to agree to new rules on a voluntary basis. This contrasts with the multilateral WTO agreement, where all WTO members are party to the agreement.

The United States (US) has blocked all appointments to the WTO Appellate Body (AB) since 2017, citing certain procedural and substantive issues that need resolution. Currently, the AB is dysfunctional.

 

Information Technology Agreement

It is a plurilateral agreement enforced by WTO. It entered into force in 1997. The aim of the treaty is to lower all taxes and tariffs on information technology products by signatories to zero. The ITA covers many high technology products, including computers, telecommunication equipment, semiconductors, software etc.

 

India’s Stand on ITA

Dispute settlement body of WTO ruled against India’s imposition of tariffs on mobile phones and electronic components. India argued that at the time of signing the ITA, products such as smartphones did not exist, and hence, it was not bound to eliminate tariffs on such items.

 

 

Issues with the WTO

• Negotiation Deadlocks: Consensus-based decision-making process has often resulted in negotiation deadlocks, making it difficult to reach meaningful agreements on critical issues, such as agricultural subsidies, intellectual property rights, and market access.
• Developing Country Concerns: Developing countries argue that developed countries tend to dominate negotiations and have an advantage in shaping the rules to their benefit. Developing countries often struggle to fully participate in the negotiation process and face challenges in implementing and complying with complex trade rules and standards.
• Rising Protectionism and Bilateralism: In recent years, there has been a rise in protectionist measures and a shift towards bilateral or regional trade agreements, which bypass the multilateral framework of the WTO.
• Emerging issues: There are concerns that WTO has not kept pace with 21st-century trade, which requires new/updated provisions in multilateral agreements. Several new issues have emerged since 1995, such as the linkages between trade and climate change, SDGs, gender issues and human rights.
• Members’ Development Status: Concerns have been raised regarding ability of certain members to self-designate as developing countries and thereby to benefit from the special and differential treatment provisions. There is a problem in WTO negotiations as there is no agreed definition of what constitutes a developed or developing country at the WTO.
• Dispute settlement crisis: The WTO dispute settlement is in crisis as the US blocked appointments to the Appellate Body. Members face challenges enforcing WTO obligations without a functioning appeals mechanism.
• Inadequate monitoring mechanism: Experts raise concerns that WTO is unable to identify and address violations of its multilateral agreements in an effective and timely manner.