India to have more older population set as fertility falls below replacement: Moody’s

The transition highlighted by Moody's indicates India is moving through the later stages of the Demographic Transition Model. While India currently enjoys a demographic dividend (a higher proportion of working-age population compared to dependents), the falling fertility rate means this window is narrowing. The Total Fertility Rate (TFR) falling below the replacement rate (2.1) means that over time, the population will stabilize and eventually decline, leading to an inverted demographic pyramid. This shift from a young population to an aging one necessitates long-term planning for eldercare, healthcare infrastructure (geriatrics), and social security nets like pensions. The National Population Policy 2000 aimed to achieve population stabilization by 2045, and this data suggests the country is on track, albeit with new challenges emerging concerning an aging demographic.

The demographic shift outlined poses critical economic challenges. Historically, a growing working-age population has been a key driver of GDP growth and domestic consumption. A shrinking workforce can constrain productive capacity and reduce aggregate demand, as fewer households translate to fewer consumers. To sustain growth in this environment, economies must pivot from labor-intensive growth to productivity-led growth. This requires significant investments in human capital (education and skilling), technology adoption, and infrastructure. Furthermore, an aging population increases the dependency ratio (the ratio of dependents to the working-age population), placing a heavier fiscal burden on the state and the shrinking workforce to fund social security and healthcare. The Economic Survey has previously flagged the need to prepare for an aging population, emphasizing that India must focus on maximizing the current demographic dividend through job creation before the demographic window closes.

The report highlights a global pattern of declining fertility, with significant variations across regions. While East Asian countries (like Japan and South Korea) and Europe are already experiencing advanced aging, emerging economies like India, Brazil, and China are rapidly following suit. Within India, this demographic transition is not uniform; Southern states have already achieved TFR below replacement levels, while some Northern states (like Bihar and Uttar Pradesh) still have higher fertility rates. This regional disparity necessitates state-specific policy responses. Southern states will need to manage an aging population sooner and may require inward migration of labor to sustain their economies, potentially altering internal migration patterns. Conversely, Northern states must focus on harnessing their remaining demographic dividend through education and employment opportunities before they too enter the aging phase. The varying demographic profiles across states complicate national-level policy formulation, requiring a nuanced, federal approach.