
NEW DELHI: A McKinsey report on demographics has warned that India has only 33 years, a little over one generation, until it is as "old" as advanced economies are today. It underscores the need for India to get rich before it gets old. The report highlights that despite high progress, India’s GDP per capita is just 18% of the high-income threshold.
According to the report, India’s total fertility rate is 1.98 children per woman, which is below the replacement rate of 2.1. As per an UN projection, India’s population will peak at 1.7 billion in 2061 and decline thereafter. Under current projections, India will have more than twice as many people as China by the end of the century.
According to the McKinsey report, the shift in Indian demography will result in slower economic growth. It says that from 1997 to 2023, India’s beneficial demographics added 0.7 percentage points per year to GDP per capita growth. It predicts that through 2050, that advantage will shrink to just 0.2 percentage points per year.
The report adds that an aging population will put pressure on public finances and families to support older people. “By 2050, there will be just 4.6 working-age individuals per senior (down from 10 today), and by 2100, 1.9—about the same as Japan today. This shift will strain public finances and family structures alike,” says the report.
One way India can delay the negative economic consequences of demographic shift is by increasing female labor force participation (currently at 29% for ages 20-49 compared to 50-70% in other emerging economies).
The report says that India can benefit from being increasingly important for the world. While today it represents 9% of global consumption, this is expected to rise to 16% in 2050.