India’s diamond

KIRAN KARNIK

THE headline may lead you to think that this is about the diamond jubilee last year of India’s independence, or the forthcoming one of the Republic. This is not about either of these milestones, nor about the famous Kohinoor. It is about two other diamonds that, looking ahead, are likely to have a huge influence on the country and people.

The first diamond is the demographic profile by age, an issue we have noted in earlier editions of this column. The country, as a whole, has transitioned to a total fertility rate (TFR) of less than 2.1, which is the benchmark for the so-called replacement rate. It indicates a flattening of the rate-of-growth curve, with population increase now driven only by past momentum. Projections indicate that the population should stabilize in about two decades and begin to fall thereafter. At the start of the next century, by one estimate, the population may be at almost exactly what it was in the year 2000, namely, one billion. 

As in most areas, the average tends to cloud other figures and facts. For example, the southern states will, within the course of a decade, begin to experience population decreases; but a few others (Bihar, for example) will see increasing numbers for some decades to come. This has socio-economic and political implications, some of which were discussed in earlier columns (e.g., “Demography-driven migration”, Civil Society, June 2022). Yet, for an overall analysis, looking at the country as a whole provides many interesting insights.

Already, better healthcare has considerably increased longevity. As a result, there are many more elders (60-plus years of age), and their number is expected to double in the next two decades. Combined with a decreasing birth rate, it makes elders the fastest-growing segment of the population. Their share in the overall population will increase from about 10  percent now to 20 percent by 2050. Of course, even then, there will be decreasing numbers in each age range above 60 years. Similarly, below 18 years, the number at each age will decrease. This will result in a big bulge in the working-age group of 18 to 60, resulting in the much-publicized demographic dividend (fewer dependants per working-age person). The result of these demographic changes will shape-shift the standard developing-country pyramid of population-by-age to a diamond. This is India’s first diamond.

The second diamond results from economic growth. It depicts the number of people at various levels of income. Here, too, the traditional shape in countries like India has been a tall pyramid, with a large number of poor people (a big base) and ever fewer people as you move up to higher income levels. The huge disparity between the low earners and the high makes for a tall pyramid. In a few countries — the Scandinavian ones, for example — where income inequality is low, it tends to be a very short pyramid.

The success of India’s poverty alleviation programmes has resulted in moving hundreds of millions to above-poverty incomes. As we project economic growth, it is clear that the future will see a big bulge in the lower middle class as people move out of poverty and begin to earn more. At the same time, income disparities continue: the growth in the number of billionaires, for example, is astounding. With fewer at the bottom (below the poverty line), a bulge in the middle class, and growing numbers (though low in percentage-of-population terms) of super-rich, the income distribution will resemble a tall diamond.

Each of these two diamonds has important implications for India. One, for demography, can be summarized as “less Anganwadis, more (elder) age-care homes”. Second, the need to convert maternity wards into geriatric ones. Another, as noted earlier, is the “demographic dividend”. Fourth, to reap the demographic dividend and in the context of rapidly evolving technology, the essentiality of high-quality education, re-skilling, and up-skilling. In this, training for new skills is already a challenge; it requires an urgent and at-scale thrust on creating both training content and trainers (faculty). While there is a great deal of material already available online (much of it, free), its productive use will require selection and curation, as also guides and facilitators. The age-shift will also mean fewer schools and more colleges; fewer schoolteachers, and more professors. In a sense, less BEds and more PhDs.

The income diamond will, one hopes, transform back into a pyramid — but at a higher base level and, like the Scandinavian form, be a short pyramid indicative of lower income disparity between top and bottom levels. The expected progression of hundreds of millions from near-poverty to lower middle class, and the continued upward movement of those above will mean big shifts in demand patterns. This will be both accelerated and modified by the changing social mores. The so-called middle class of the 1950s and ’60s (which, in comparative terms, was really the rich class) was, by and large, satisfied with what they had. The 1970s and ’80s were times of transition. Post-1991, material aspirations exploded, triggered by global comparisons.

Today, growing wants drive status-based consumption, evidenced by the demand for top brands. One indicator is the number of high-end automobiles visible on the road. Even entry-level demand is now not for the low-cost models, but for slightly more expensive ones. In fact, marketing a car as “low-cost” makes it unsellable (as the Tata Nano discovered). In the next two decades, we are bound to see more such shifts in the demand and consumption pattern for a whole range of products. So too for services like education and healthcare. Thrift, economy, and value for money are rapidly being overtaken by status indicators based on price.

Clearly, the two diamonds are going to play a major role in the India of the future. The implications, policy choices and imperatives need to be carefully thought through.

Kiran Karnik is a public policy analyst and author. His most recent book is ‘Decisive Decade: India 2030, Gazelle or Hippo’