Demographic trends and economic growth in India

Abstract

This study investigates the impact of demographic trends on economic growth in India, focusing on the period after the country entered a favorable demographic phase. India’s demographic transition, marked by declining fertility and rising working-age population, has created a "window of opportunity" expected to last until 2061. Utilizing panel data from 25 Indian states between 1981 and 2015, the study assesses how demographic factors influence per capita income. Findings indicate that the working-age population accounts for nearly one-fourth of income inequality across states. However, realizing the full demographic dividend depends on enabling policies—quality education, healthcare, employment, gender equity, and infrastructure. A significant gap in existing literature is the lack of empirical evidence post-demographic transition and the omission of interaction effects with policy variables. This research contributes a comprehensive, data-driven perspective on how demographic shifts can translate into economic growth, emphasizing the importance of proactive policy interventions to harness India’s demographic potential.