First, some numbers that stunned me.
While reflecting on the 250th anniversary of the Boston Tea Party, a blog from the U.S. Census Office made the following observation: “The first census in the United States (1790) counted almost 4 million residents. The first census in Great Britain (1801) counted almost 11 million residents. Fast forward to today when according to the Census Bureau's International Database, the U.S. population is an estimated 339.7 million and the United Kingdom's 68.1 million.”
In other words, while the UK's population was three times larger than the US's about 225 years ago, it is now only one-fifth of America's. Few countries have experienced such contrasting fortunes during this period except these two. At its peak, around 1922, the British Empire controlled a fourth of the world's land area. Its decline since then has been equally spectacular. The US, in contrast, has steadily grown stronger for well over a century. In fact, over the last 50 years alone, its economy has expanded 27 times, far outpacing the 21-fold growth of the global economy.
Population And Growth
Let's consider another data point. After decades of moderate growth or stagnation, while the world's population doubled—from 4 billion to 8 billion—between 1974 and 2023, the global economy grew a staggering 21 times during the same period.
The point I'm making with these examples is simple: population growth has been one of the biggest drivers of economic growth across the world in recent years. This has been true for the US, Japan, South Korea, China, and now India. These countries have been dubbed “miracle economies” in different decades. While the US has been a consistent performer during periods of population explosion, Japan, South Korea, and China have had their occasional moments of glory. The key reason for this divergence—consistency in the US versus occasional bursts in other countries—lies in differences in population structure across these nations.
My analysis of the economy and population dynamics of the four miracle economies—the US, Japan, South Korea, and China—shows that a median age of 40 or below is what drives economic growth. Once this threshold is surpassed, a pronounced decline begins. According to authoritative projections, India is expected to cross this threshold between 2055 and 2060. Therefore, India has a limited window of 30-35 years to capitalise on its youthful demographic.
Greying, Slowing Japan
Let's take Japan as an example to understand why keeping the median age below 40 is crucial. Japan crossed this threshold in 2000, with its median age reaching 40.7 years. At that time, the size of the country's economy was $4.9 trillion. In 2023, while the median age climbed to 49.7, the size of its economy shrunk to $4 trillion. This is why Japan is often cited as a classic case of “shrinkonomics”, that is, a country that is shrinking on all fronts.
Let's look at China, another miracle economy that has experienced gravity-defying growth since the 1990s. Its median age was 23.7 years in 1990, and the size of its economy was a modest $396 billion. Today, its median age is likely to have surpassed 40, and the size of its economy has soared to a staggering $19.5 trillion. In other words, before it began to grey, China's economy grew 43 times in 35 years. However, even before its median age crossed the threshold of 40, the headlines coming out of China in recent years (even before the COVID-19 pandemic broke out) have indicated that its economy is struggling on many fronts. The ageing population has put a decisive brake on the country's economic expansion.
America's Steady Age Profile
Now, consider a country that has kept growing while managing its age profile for decades: the US. Its median age reached 30 in 1980, which was higher than India's current median age. While the US median age has since climbed to 38.9 after 43 years, India is unlikely to have the same luxury for an extended period. The reason the US has managed to keep its age profile relatively young, despite a significant dip in its fertility rate after the 1970s, is its liberal immigration policy. According to a Pew Research report, “in 1970, the number of immigrants living in the U.S. was about a fifth of what it is today. Growth of this population accelerated after Congress made changes to U.S. immigration laws in 1965. Immigrants today account for 14.3% of the U.S. population, a roughly threefold increase from 4.7% in 1970. The immigrant share of the population today is the highest since 1910 but remains below the record 14.8% in 1890.”
India's Small Window
India would be well-served by adopting its own version of the approach the US has followed over the years. While India cannot afford to be liberal with immigration from other countries, it could implement policies that facilitate large-scale internal migration. The median age in southern states is 32 and older, while in states like Bihar, Uttar Pradesh, Madhya Pradesh, Rajasthan, Chhattisgarh, and Jharkhand, it ranges from 22 to 26. Promoting liberal internal migration could help ensure a younger population profile across all states, boosting growth nationwide. This approach could help India make the most of its limited window before an ageing population begins to overwhelm the system. That is the only option. Otherwise, we will grey before we grow to our full potential.
(The author is Consulting Editor, NDTV)
Disclaimer: These are the personal opinions of the author
