Are we winning the Demographic Battle? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 26 October 2012
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Are we winning the Demographic Battle? A  A  A


- By Asad Dossani, Author, The Lucrative Derivative Report


Asad Dossani
By many standards, India is an over populated country. High population growth combined with limited resources and infrastructure that cannot keep up are a potential recipe for future disaster. Of course, if we manage population growth well, we can instead use it to our advantage.

The World Bank publishes population statistics and projections, and one of the key indicators studied is called the dependency ratio. The dependency ratio is equal to the number of people who are dependent (aged under 15 and aged over 65), divided by the number of people who are productive (aged between 15 and 65), expressed as a percentage.

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For example, a dependency ratio of 50% means that for every two people that are capable of earning, their income must support one person who is dependent. A dependency ratio of 100% means that the income of one earner must support one dependent, and so forth.

Naturally, a higher dependency ratio is bad. It means that there are fewer people working relative to those that are dependent. So where do we fit in to this? India's dependency ratio is just under 55%. By comparison, China's dependency ratio is 40%, USA's is 50%, Japan's is 56%, and UK's is 51%.

China has a fairly low ratio, while the rest are all around the same. According to population growth projections by the World Bank, dependency ratios are set to change dramatically over the coming decades. Most developed economies have low birth rates and ageing populations, and will witness a rise in the dependency ratio. China, due to its one child policy, is also set to experience a rise in the dependency ratio.

India is an exception to this. Of the major economies, we are the only one that will see a fall in the dependency ratio. By 2050, China, USA, and UK will have dependency ratios above 60%, while Japan's will be near 90%. India's will fall below 50% by this time. Obviously these are very long term forecasts that could change, but generally population growth forecasts are quite accurate. Our population will surpass China's population by 2025.

The numbers tell us that we are winning the demographics battle. Unlike most other economies, we will not face the issue of an ageing population. However, this doesn't mean anything unless we can adequately deal with population growth. This means investing in good infrastructure to improve the quality of life for current and future generations.

is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

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6 Responses to "Are we winning the Demographic Battle?"

Mala Singh

Oct 29, 2012

while the emphasis should be on infrastructure builing, we should also look at the control of population by educating the rural and the backward masses...
This is everyone's role to play not alone the Govt. bodies

Like 

Srinivasan

Oct 28, 2012

I have always held the opinion - that our demographic growth is a bane. I am in the minority when expressing that view but I firmly believe that's the reality, in the long run.

We are unable to effectively employ the entire population, give them the right opportunity. Whatever growth we have gets diffused because of the overpowering growth of the population.

If people have to see the standard of living rise - we need to reach stability in our population.

The productivity in the world is far higher than what we have - and if we produce (people!!) the way we do (higher than replacement rate), we will continue to push our nation back - because any attempt to improve productivity will make more people unemployed or underemployed.

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Balakrishnan R

Oct 28, 2012

Once our dependency ratio reduces, we can export people to higher dependency ratio countries. Exception is Japan (natural resources are low). Russia and North America may be most probable countries.

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S PADMANABHAN

Oct 28, 2012

Well, this is quite thought provoking. If the Government wakes up to the imperative need to continuously invest in improving the infrastructure of the country, there will be more employment opportunities for the growing population, which will eventually boost our economy.

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P.Prasad

Oct 28, 2012

Winning the demographic battle is going to result in another set of problems - like gainful employment, inflation and cultural shift in values. All projections are just abstractions of an idle mind. Nature balances itself without any outside help.

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B S MURTHY

Oct 28, 2012

Population control may be apparently difficult but not impossible. For example, we can reduce the dependency ratio of unproductive population like beggars, leprosy patients, persons of 80 years who are bed ridden etc. just by going in for mercy killing. There is no harm to the individuals but lot good to the society.

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