China aged after getting rich; India may not

India boasts one of the world's youngest populations, but its fertility rate has fallen below the replacement level, potentially reshaping the nation's demographic future. The total fertility rate (TFR) stands at 1.9 births per woman, which, if sustained, will lead to an aging population as fewer young people enter the workforce and the share of older individuals rises.

Unlike China, India is entering this aging phase at a lower income level. According to the World Bank, India's GDP per capita remains around $2,700, whereas China had already surpassed $13,000 before its population began aging rapidly. This discrepancy raises an important question: could India become an aging society before achieving the per capita income levels at which many other economies began dealing with the economic challenges associated with aging populations?

Economists emphasize that the question deserves attention, as the foundations for managing an aging population should be established well before it actually occurs. An aging population brings slower workforce growth, higher healthcare costs, increased pension obligations, and a greater demand for long-term care. Wealthier nations confronted these pressures after accumulating greater wealth; India may need to prepare for them sooner.

However, experts caution against treating India's falling fertility as an immediate crisis. The demographic dividend, a temporary period when a country's working-age population grows faster than its dependent population, creating potential for faster economic growth through higher labor force participation, productivity, and savings, is still intact in India.

The challenge lies in whether the country can convert the next two decades of abundant labor into lasting productivity gains before aging begins to negatively impact growth.

The demographic shift is unfolding gradually rather than abruptly. Currently, people aged 15-59 account for 66.4% of India's population, while those aged 60 and above make up 9.7%. The working-age population is expected to continue growing until around 2041, providing policymakers with a sizable—but finite—window to accelerate economic transformation.

While the decline in the fertility rate points to a critical shift in India's population story and a narrowing window of opportunity for reaping the benefits of the demographic dividend, Rajani Sinha, Chief Economist at CareEdge Group, reminds us that aging is not expected to materially affect labor supply in the immediate future.

However, she stresses the importance of focusing on employment generation, skill development and technology adaptation to improve future employability, particularly in the age of rapidly changing labor markets.

According to UN population projections, India's median age is expected to increase from 29 years to 40 years by 2056. This development will eventually lead to the old dependency ratio overtaking the share of the young dependent population. Despite this looming challenge, India's demographic dividend remains intact until 2059, when the working-age population (ages 15-64) is projected to remain above 65%.

Economists suggest that policymakers should prioritize education until 2056 to increase the productivity of the working-age population and subsequently prioritize healthcare expenditure. The message is clear: India is not running out of time today. However, every year that productive jobs, skilling, and education lag behind makes the eventual aging transition harder to manage.

The pace of population aging varies significantly across India. Southern states have already crossed the replacement fertility threshold, while many northern states remain younger with comparatively higher fertility. As a result, aging has already begun in the south and larger cities, with different policy implications for each region.

Southern states will increasingly need investment in geriatric healthcare, pensions, and eldercare infrastructure, while younger states like Bihar still require investment in education, childcare, and employment generation. Bihar is not expected to reach replacement fertility until around 2039.

An inter-state migration flow could help soften some of these regional differences. However, governments will need to continually recalibrate spending priorities in response to these changing demographic dynamics.