Why in the News?
The report, ‘Dependency and Depopulation? Confronting the Consequences of a New Demographic Reality’, released by McKinsey Global Institute, provides a detailed comparative analysis of demographic dynamics in developed (first wave) and developing (later wave) countries.
IMPORTANT: What is Demographic Transition Theory?
Demographic transition describes changes in birth and death rates and population age structure as societies develop economically and technologically.
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Key Highlights of the McKinsey Report
- Two-thirds of humanity now live in countries with fertility rates below the replacement level of 2.1 children per family.
- Age structures are shifting from pyramids to obelisks, with a growing elderly population and a shrinking youth demographic.
- Populations in some major economies are projected to decline by 20%-50% by 2100 (UN).
- The global support ratio (working-age individuals per senior aged 65 or older) is projected to decline from 6.5 today to 3.9 by 2050.
- In India, the ratio will fall from 10 workers per senior in 1997 to 4.6 in 2050 and just 1.9 by 2100, similar to Japan’s current levels..
- Consumption Patterns in India:
- India’s share in global consumption is projected to rise from 9% today to 16% by 2050, while shares of advanced economies are expected to remain flat or decline.
- By 2050, the share of consumption by seniors aged 65 and older will rise from 8% to 15%, reflecting changing consumer demographics.
- The percentage of hours worked by seniors is projected to increase from 2.9% to 5.4% by 2050 under current trends.
About India’s Diminishing Demographic Dividend
- India has 33 years to fully capitalize on its demographic dividend before its support ratios align with those of advanced economies.
- From 1997 to 2023, India’s favorable demographics added 0.7 percentage points per year to its GDP per capita growth.
- This contribution is expected to shrink to 0.2 percentage points per year through 2050 as the population ages.
- India’s support ratio (working-age individuals per senior) is projected to decline significantly, creating greater dependency on fewer workers to support older populations.
- By 2050, there will be only 4.6 workers per senior, down from 10 workers per senior in 1997.
- India’s GDP per capita is currently 18% of the World Bank’s high-income threshold, emphasizing the need for faster economic progress to “get rich before it gets old.”
- Increasing labor force participation, particularly among women, and improving worker productivity are critical to sustaining economic growth.
- Despite rapid progress, India’s worker productivity remains at $9 per hour, significantly lower than the $60 per hour average in high-income countries.
PYQ:[2012] Consider the following specific stages of demographic transition associated with economic development:
Select the correct order of the above stages using the codes given below: (a) 1, 2, 3 (b) 2, 1, 3 (c) 2, 3, 1 (d) 3, 2, 1 |
