India’s Fertility Rate Falls Below Replacement Level: What It Means for Population, Economy and the Future Workforce?

The decline of India’s fertility rate to below the replacement rate of 1,9 children per woman represents a major demographic change for India. The decrease in fertility indicates the end of decades of large increases in the size of India’s population and the beginning of a more moderate, stable rate of population growth.

Current estimates place the number of births per woman at approximately 1.9 due to changes in social norms such as more people living in cities, increased levels of education, delayed marriage and higher expenses for maintaining a household. 

Even with India’s large number of people and a relatively large number of young adults, the trend of declining fertility leads to questions about the impact of declining population growth on future workforces and on the economy as well as how to meet the needs of an ageing population in the next several decades.

What the Fertility Decline Means for India’s Population?

The demographic shift beginning with a decline in fertility rates below replacement levels in India represents a significant long-run change to the population and how it will grow, age, and be distributed by region:

Continued Population Growth in the Near Term 

While fertility rates are declining, there will be an ongoing increase to the size of India's population due to “population momentum,” which is defined as a large number of people in reproductive age cohorts as well as the number of births will remain relatively high even as each individual woman has fewer births.

Slowing Overall Population Growth Rate 

One of the first and most observable changes related to the declining fertility rate is the gradual decrease in the overall growth rate of the population. Over time, fewer children being born will further slow how rapidly the population grows. This will relieve some of the pressure on already struggling basic needs, such as schools, housing, and infrastructure, but will mark the start to population stabilization.

Long-Term Population Stabilization 

If fertility continues below replacement level for several decades, it is expected that at some point the population of India will be stabilized and that it will reach a plateau. This stabilization does not happen instantaneously, rather, it takes several generations to fully visualize the demographic changes throughout the country.

What It Means for the Economy of India?

Here is what it means for the economy of India in terms of wage, demographic dividend phase: 

End of the “Demographic Dividend” Phase 

India has taken advantage of a great many workers compared to and few dependent youth since the majority of India’s population will be 15 & older by 2030. As the fertility rate continues to decline, this advantage is quickly dwindling.

Though there will still be millions of workers available for a while longer, the overall growth in workers will slow, making it more difficult to count on just adding to the number of people to grow the economy.

Rising Wage Pressures in Some Sectors 

Because there is a smaller pool of workers available to employers for labor-intensive jobs which are things that require a lot of people, wages for workers will begin to rise where demand for workers is still very strong like construction, manufacturing.

Rising wages for workers will increase the standard of living for workers while at the same time increasing the price of producing goods, forcing businesses to automate or find new ways to improve their business processes to remain competitive.

Higher Fiscal Pressure from Aging Population 

Falling birth rates and longer life expectancies will mean that India will eventually become an "Aging Population," where the number of older people will put more stress on the country’s supply of healthcare services, pension systems and from elderly care services.

The increase in the government’s fiscal pressure associated with providing healthcare services, pensions, and elderly care to the country will continue to increase if there is not a significant increase in the labor force over the same time period.

Implications for Future Workforce 

The decline of India’s fertility rate below replacement level will have an incremental effect on the future size, structure and quality of the national labour force. 

Women's Rising Participation in the Workforce

As family sizes become smaller and social norms evolve, women's participation in the workforce will become increasingly important to help maintain the supply of labour. Policies supporting childcare, workplace flexibility and safety will significantly contribute to unlocking this potential. Companies and government agencies must prepare for a workforce that works longer.

Slower Working-Age Population Growth

One major impact is that the growth rate of the working-age population at ages 15-64 will decline. That will occur because fewer children are being born today, therefore fewer young people will be available to enter the labour force over the next several decades.

Greater Reliance on Automation 

The overall number of workers in India will decrease at a lower rate than in past years. The main concern for India is if the country can keep up with the rate of technological change through education, training, and labor policies.The introduction of technology into the workplace has shifted away from manual labour to more technologically driven job functions.