Will India Grow Old Before it Gets Rich?

[Riaz Haq]

India's population has aged faster than expected while its economic growth has slowed over the last decade. This raises the obvious question: Will India get old before it gets rich? Is India getting poorer relative to its peers in the emerging markets? 

India's Population Aging. Source: Semafor

As India's birth rate declines rapidly, the proportion of people age 60 and over is rising in the general population. This is particularly true of the southern states like Kerala and Tamil Nadu. Meanwhile, the expected demographic dividend from the youth bulge in the country has yet to materialize. High youth unemployment is threatening to cause serious social instability in the world's most populous country. It is also causing a massive brain drain.  

India's GDP Per Capita Compared to Emerging Markets Average. Source...

India is losing its best and brightest to the West, particularly to the United States, at an increasingly rapid pace. A 2023 study of the 1,000 top scorers in the 2010 entrance exams to the Indian Institutes of Technology (IIT) — a network of prestigious institutions of higher learning based in 23 Indian cities — revealed the scale of the problem. Around 36% migrated abroad, and of the top 100 scorers, 62% left the country, according to a report in the science journal Nature.  Nearly two-thirds of those leaving India are highly educated, having received academic or vocational training. This is the highest for any country, according to the Organization for Economic Co-operation and Development.

Annual Population Growth Rapidly Falling Across India. Source: Semafor

India has the lowest GDP per capita among the 5 BRICS nations. The country's GDP growth rate is much slower than the average for emerging markets. It means that India is becoming poorer relative to the rest of the developing world. 

India's GDP Per Capita is Very Low. Source: BBC

The north-side geographic divide in India is growing. The southern five of India’s 28 states (Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana) contain 20% of the population and contribute 31% of the GDP, according to The Economist magazine. Among startups, 46% of tech “unicorns” are southerners, particularly from Bangalore. The five southern states provide 66% of the it-services industry’s exports. The latest craze is for “global capability centers”, where multinationals assemble their global auditors, lawyers, designers, architects and other professionals: 79% of these hubs are in the south.

Indian Parliament Seats Based on Current Population. Source: Nation...

There has always been a north-south divide in India in terms of population and wealth. The south has been wealthier and less populous than the north. But the political power is still concentrated in the poorer and more populous northern states. This situation serves Prime Minister Narendra Modi and his BJP party well. But it also creates significant resentment in southern states. 

In his book "The Raisina Model", British Lord Meghand Desai says that India's breakup can not be ruled out. Specifically, he points to three issues that could lead to it:

1.  Cow protection squads are killing Muslims and jeopardizing their livelihoods.  The current agitation about beef eating and gau raksha is in the Hindi belt just an excuse for attacking Muslims blatantly. As most slaughterhouses in UP are Muslim-owned, owners and employees of these places are prime targets.

2. India has still not fashioned a narrative about its nationhood which can satisfy all. The two rival narratives—secular and Hindu nation—are both centered in the Hindi belt extending to Gujarat and Maharashtra at the most. This area comprises 51% of the total population and around 45% of the Muslims in India.

3. India has avoided equal treatment of unequal units. Representation in the Rajya Sabha (Upper House of Parliament) is proportional to population size. The larger states dominate both Houses of Parliament. It would be difficult for small states to object, much less initiate reform. In future, small states could unite to present their case for better treatment. 

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