India’s working-age population growing faster than China’s

The proportion of China’s working-age population to total population will start declining from 2014 due to population ageing and low birth rates caused by the “one child policy” since 1979. Meanwhile, India will continue enjoying a rising workforce thanks to population growth.

While China’s long-term economic growth prospects will be constrained by a shrinking workforce, India has to improve education and create jobs in order to benefit from its future “demographic dividend”.

  • Thanks to population growth, the working-age population (aged 15-64) has increased in China and India since the 1980s, contributing to strong economic growth. In 2009, the share of the population aged 15-64 accounted for 73.6% and 63.9% of the population in China and India respectively;
  • The share of the working-age population in China will start declining from 2014 as a result of population ageing and a slowdown in population growth mainly due to the country’s “one child per family policy” introduced since 1979 to curb a population explosion. China will also experience rapid ageing;
  • Meanwhile, the share of the working-age population will continue rising in India owing to its young and growing population, and is estimated to reach 67.0% of the population by 2020, compared to 71.6% in China.
Share of population aged 15-64 and 65+ to total population in China and India: 2009-2020
% of population

Source: Euromonitor International from national statistics/UNNote: Data from 2010 to 2020 are forecasts.

Implications

The different demographic trends have important implications for China and India:
  • China’s economy is enjoying a “demographic dividend”, which will boost economic growth amid a peak in the share of the working-age population. China’s economy grew robustly at an annual average 11.2% between 2004 and 2009 in real terms, higher than 8.1% in India;
  • China’s shrinking workforce from 2014 will affect economic growth prospects. A combination of a shrinking workforce and ageing will put pressure on social services, potentially increasing the tax burden on the working population;
  • India will continue enjoying a growing and young workforce, enabling its economy to benefit from a “demographic dividend” in the coming years. In 2009, the mean age of the Indian population stood at 27.5 years old, significantly younger than 36.8 in China, enabling opportunities for a consumer and investment boom;
  • However, India’s working-age population remains less skilled compared to China’s workforce due to the country’s lower literacy rate. In 2009, India’s adult literacy rate stood at 67.7% of the population aged 15+ compared to 94.0% in China, which may hinder India’s productivity and economic growth potential;
  • India’s economy also faces the challenge of creating enough jobs for its growing working-age population. India’s unemployment rate stood at 9.1% in 2009, compared to 4.3% in China;
  • India’s population growth will place a challenge on the country’s infrastructure. Due to poor management and a lack of investment, India’s infrastructure system is inadequate and will hinder the business environment
China’s and India’s mean age and old-age dependency ratio: 2000-2020
Years old; %

Source: Euromonitor International from national statistics/UN.Note: Data from 2010 are forecasts.

Prospects

  • Euromonitor International estimates that by 2030 India will have overtaken China as the world’s most populous country. By 2050, the UN estimates that India’s population will reach 1.6 billion, compared to 1.4 billion in China;
  • India’s working-age population will see period growth of 17.4% during 2010-2020, compared to a modest rise of 0.3% in China;
  • China’s old-age dependency ratio – the proportion of people aged 65+ to working-age adults – will increase from 13.1% in 2010 to 18.3% by 2020 while India’s old-age dependency ratio will rise more gradually from 7.6% to 9.4%.
These trends will put India in a demographic advantage over China, helping to increase demand and fuelling economic growth. However, the challenge will be to create enough jobs, while population growth will put pressure on India’s natural resources and public services. China’s government policies will shift towards addressing the rapidly ageing population, while the different demographic trends will provide varying consumer demand.