Size and Growth of Population and Economic Development

Last updated on December 3rd, 2019 at 11:33 am

1. Population Growth and Rate of Saving and Investment:

Economic growth requires increasing supplies of capital goods. A higher rate of economic growth can be achieved by accelerating the rate of capital formation. Increasing supplies of capital goods become possible only with higher rate of investment and a higher role of investment, of turn, is possible if the rate of savings is high.

Now, increase in population by adding to the number people whose requirements of “feeding and clothing” have to be met which tends to raise consumption and, therefore, lowers both saving and investment. Coale and Hoover, in their famous work explained that saving rate was reduced by population growth because of increase in burden of dependency.

He argued that with high fertility rate among the younger persons and declining mortality (death) rate among the old-age people, in the growing population the proportion of non-working age groups which depend on the working or earning members of their families increases.

Since all must consume, in the absence of increase to productivity, saving per person must fall. Thus rapid growth of population by causing lower rate of savings and investment tends to hold down the rate of capital formation and therefore the rate of economic growth in developing countries like India. Under conditions like those in India population growth therefore actually impedes economic development rather than facilitate it.

2. Investible Resources and Raising Per Capita Income:

While on the one land rapid growth in population reduces investible resources for accelerating capital formation, it raises the requirements for investment to achieve a given target increase in per capital income. Suppose population of a country A is increasing at 1 per cent per annum and that of a country B at 3 per cent per annum.

Given that capital-output ratio is 4: 1, then country A would have to invest 4 per cent of its current income to maintain its per capita income, while country B would have to invest 12 per cent of its current income even to maintain its per capita output.

Thus, when the population is increasing at a rapid rate, comparatively larger investments are needed to maintain the current level of income. Thus, given the scarcity of investible resources adequate resource are not left to raise per capita income significantly.

3. Lowers Growth of Per Capita Income:

Like a thief in the night, population growth robs us of most of the gains in national income made from higher investment. Rapid population growth nullifies our investment efforts to raise the living standards of our people. In other words, a high rate of increase in population swallows up a large part of the increase in national income so that per capita income or living standards of the people do not rise much.

This is precisely what has happened during the planning era in India. Thus, while the aggregate national income of India went up by 3.6% per annum in the First Plan period and 4.1% per annum in the Second Plan period, per capita income rose by only 1.8 per cent and 2 per cent per annum respectively.

Average annual growth in national income and per capita income in various Five Year Plan Periods in given in Table 41.2. It will be seen from this table that the annual growth in per capita income has been much less than the annual growth rate in that national income. It is the population growing at 2 per cent per annum or more during the planning period that has caused per capita income to rise much less than the increase achieved in national income.

Table 41.2. Annual Average Growth Rate (at 2004-05):

However, since 1991 population growth rate has been less than 2 per cent, it was 1.93 per cent between 1991 to 2001 and 1.6 per cent between 2001-2011, on the one hand and growth rate of national income was much higher on the other (see Table 41.2).

Therefore, the growth rate of per capita income has been relatively higher. Per capita income (at 2004-05 prices) grew at the rate of 4.6 per cent in the Eighth Plan period (1992-97), 3.5 per cent in the 9th plan period (1997-2002), 5.9 per cent in the 10th plan period and 6.3 per cent in the 11th plan period. This higher per capita income growth rate since 1991 has tended to raise the standard of living of the people higher than before.

That the population growth prevents the rapid rise in per capita Income and therefore rise in living standards of the people can be expressed by the following growth formula

g = Iα – r

where g stands for the rate of growth of per capita income, I represents rate of investment, a stands for output-capital ratio (or productivity of capital) and r represents rate of population growth.

Since rate of growth in national income is given by the rate of investment multiplied by the output-capital ratio, la will signify the rate of growth of national income. Now, it will be seen that rate of population growth r appears as a negative factor and will therefore lower the rate of growth of per capita income g. It therefore follows that if rate of growth of per capita income g, and the rate of rise in living standards with a given rate of investment is to be raised, the rate of growth of population should be lowered.

4. Population Growth and Marketed Surplus of Food-grains:

Another way in which growth in population is impeding economic development is its effect on marketed surplus of food-grains. The marketed surplus of food-grains is a pre-requisite for expansion in non-agricultural employment and output.

When a country grows and accelerates its pace of industrialization, it requires food-grains to feed the workers who are employed in industries. If enough surpluses of food-grains are not forthcoming this acts as an important constraint on the industrial development.

This prevents the living standards of the people to rise rapidly. Now, marketed surplus of food-grains is the difference between the output of food-grains by the agricultural population and their consumption of them. Thus,

Marketed surplus of food-grains = (0 – C_s).

Where 0 stands for output of food-grains, and C. for consumption of food-grains by the fanners themselves. As about 65% of the population is engaged in agriculture, the most of the increase in population also takes place there.

This increase in population in the agriculture raises the consumption of food-grains, i.e., C_sin the above equation and therefore reduces the marketable surplus, if output remains the same. Even if output is rising, the extra consumption by the increase in population tends to lower the growth in marketed surplus for food-grains.

We thus see that the growth in population has an adverse effect on the marketed surplus of food-grains and these acts as a drag on the growth of output and employment in industries. In India, in several years, increase in agricultural output has not been enough and further that the rapid growth in population has tended to reduce the growth of marketable surplus. This had an adverse effect on industrial development in India.

Rapid growth in population in an already over-populated country also raises the problem of food security in the country. The cause of food problem in India is the rapid growth in population since 1951. In order to overcome the shortage of food-grains and to prevent the occurrence of famines in the country, India was forced to import food-grains and spend a good amount of valuable foreign exchange on them. This worsened the balance of payments problem of the country.

As a result sufficient amount of foreign exchange to import materials, machines and equipment for our industries could not be made and this obstructed the growth of industrial output. This also shows how rapid growth in population by causing food shortage inhibits the rate of industrial development.

5. Population Growth and Unproductive Investment:

In his study of population growth and economic development in India Coale and Hoover focussed on the adverse effect of population growth on the resources a variable for productive investment. According to them, rapid population growth forces the country to make non-productive investment, that is, to invest in duplicating certain social welfare facilities such as the construction of parks, houses, social buildings, sanitation works.

To the extent the Government has to increase its expenses on duplicating these social welfare facilities, investment resources for productive type of capital such as machines for industries, irrigation and fertilisers for agriculture, crucial basic goods such as steal, coal, electricity generation etc would be reduced. Thus, rapid population growth obstructs economic development by reducing the growth of productive capital.

6. Population Growth and Unemployment:

Economic development requires that employment should increase adequately so that unemployment should decrease. Explosive growth in population has caused serious unemployment and under-employment problem in India. Due to explosive growth in population in India labour force has been increasing rapidly since 1951.

In recent years labour force which was₂estimated at 309 million in 1983, went up to 333 million in 1988, to 382 million in 1994 and to 406 million in 1999-2000. As a result of this explosive increase in labour force demographic pressure on the economy has increased resulting in increase in backlog of unemployment and under- unemployment at the beginning of each successive Five Year Plan. In view of this much of our investment efforts are directed at ‘absorbing the growing labour force in productive employment, our ability to raise productivity of labour is severely constrained.

Since production processes in modem organised industrial sector is highly capital intensive, much of the growing labour force cannot be employed there. As a result, demographic pressure on land and agriculture increases resulting in the severe drop in the net sown area per capita.

In agriculture, self-employment is predominant and the joint family system prevails under which both household’s income and work are shared among the family members. Therefore, in the absence of employment opportunities outside agriculture, much of the additional labour force is forced to remain in agriculture and allied activities.

Agriculture performs the role of residual absorber. They share work in agriculture with other family members no matter how low the productivity per person becomes. Thus, with the fall in net sown area per person and increased Population pressure, disguised unemployment emerges in agriculture.

Disguised unemployment means more workers seem to be employed in it but quite a large number of additional workers do not add to agricultural output, that is, marginal productivity of workers in agriculture is zero or nearly zero.

Since population growth reduces savings and investable resources, it is very difficult to withdraw any significant number of workers from agriculture so as to equal, them with the required capital to provide them productive employment outside agriculture. To a certain extent lack of capital may be made up by harder work by workers in a country like India.

But such a method of adjustment is not easy to achieve in India. This is because in the modern times man can produce little with bare hands. To provide them productive employment workers need to be equipped with enough capital goods.

Even employment generation in agriculture apart from high yielding inputs such as fertilisers, HYV seeds, and pesticides as requires irrigation works, an important capital needed for extension of double cropping which is highly employment generating way in agriculture. Due to lack of investible resources caused partly by population growth, it has not been possible to extend irrigation facilities to the currently known irrigation potential.

It follows from above that labour force consequences of population growth are to a good extent responsible for huge unemployment and underemployment prevailing in India.

7. Population Growth and Poverty:

Last but not the least the important consequence of rapid population growth is that it has made very difficult to make a significant dent into the problem of mass poverty prevailing in’ the country. This is clear from the fact that as large as about 18 million people over and above one billion populations estimated on March 1, 20.01 are being added to our population every year as per 2001 census. This gives rise to a huge problem of properly feeding and clothing them.

Further, as has been explained in detail in the above sections such large increase in population and consequently huge increment in labour force lowers our capacity to make productive investment and thereby to increase productivity of labour to ensure eradication of poverty Prof. K. Sundaram rightly writes, “the size of increments to population is itself of some consequence. Thus is because the resource requirements of feeding and clothing even at the current low levels are such that the incremental population itself constraints the ability of the economy to raise the living standards of the existing population.”

A vicious circle of poverty operates in this regard. Rapid population growth leads to lower productivity which causes poverty, poverty causes high infant mortality rate which in turn causes high population growth. There is no wonder then, even after over 50 years of planned economic development, 317 million people lived below the poverty line in 1993-94. The decline in number of poor people to 260 million in 1999-2000 is doubtful’ because of the change methodology made in NSS of 1999-2000.

Persons are means as well as ends of economic development. They are an asset if in adequate strength and prove to be a liability if excess in strength.

Population has crossed the optimum limit in India and has become a liability.

So problem of population explosion in India has proved to be a big hindrance in the success of economic planning and development.

Following are the main effects of population explosion:

1. Problem of Investment Requirement:

Indian population is growing at a rate of 1.8 percent per annum. In order to achieve a given rate of increase in per capita income, larger investment is needed. This adversely affects the growth rate of the economy. In India, annual growth rate of population is 1.8 percent and capital output ratio is 4:1. It means that in order to stabilize the existing economic growth rate (4 X 1.8) = 7.2 percent of national income must be invested.

2. Problem of Capital Formation:

Composition of population in India hampers the increase in capital formation. High birth rate and low expectancy of life means large number of dependents in the total population. In India 35 percent of population is composed of persons less than 14 years of age. Most of these people depend on others for subsistence. They are unproductive consumers. The burden of dependents reduces the capacity of the people to save. So the rate of capital formation falls.

3. Effect on per Capita Income:

Large size of population in India and its rapid rate of growth results into low per capita availability of capital. From 1950-51 to 1980-81. India’s national income grew at an average annual rate of 3.6 percent per annum. But per capita income had risen around one percent. It is due the fact that population growth has increased by 2.5 percent.

4. Effect on Food Problem:

Rapid rate of growth of population has been the root cause of food problem.

Shortage of food grains hampers economic development in two ways:

(a) People do not get sufficient quantity of food due low availability of food which affects their health and productivity. Low productivity causes low per capita income and thus poverty.

(b) Shortage of food-grains obliges the under-developed countries to import food grains from abroad. So a large part of foreign exchange is spent on it. So development work suffers. So rise in population causes food problem.

5. Problem of Unemployment:

Large size of population results in large army of labour force. But due to shortage of capital resources it becomes difficult to provide gainful employment to the entire working population. Disguised unemployment in rural areas and open unemployment in urban areas are the normal features of an under developed country like India.

6. Low Standard of Living:

Rapid growth of population accounts for low standard of living in India. Even the bare necessities of life are not available adequately. According to Dr. Chander Shekhar population in India increases by about 1.60 crore. It requires 121 lakh tonnes of food grains, 1.9 lakh metres of cloth and 2.6 lakh houses and 52 lakh additional jobs.

7. Poverty:

Rising population increases poverty in India. People have to spend a large portion of their resources for bringing up of their wards. It results into less saving and low rate of capital formation. Hence improvement in production technique becomes impossible. It means low productivity of labour.

8. Burden of Unproductive Consumers:

In India, a large number of children are dependent. Old persons above the age of 60 and many more in the age group of 15-59 do not find employment. In 2001, working population was 39.2 percent while 60.8 percent are unproductive workers. This high degree of dependency is due to high rate of dependent children. This dependency adversely affects effective saving.

9. Population and Social Problems:

Population explosion gives rise to a number of social problems. It leads to migration of people from rural areas to the urban areas causing the growth of slum areas. People live in most unhygienic and insanitary conditions.

Unemployment and poverty lead to frustration and anger among the educated youth. This leads to robbery, beggary, prostitution and murder etc. The terrorist activities that we find today in various parts of the country are the reflection of frustration among educated unemployed youth. Overcrowding, traffic congestions, frequent accidents and pollution in big cities are the direct result of over-population.

10. More Pressure on Land:

Rising rate of population growth exerts pressure on land. On the one hand, per capita availability of land goes on diminishing and on the other, the problem of sub-division and fragmentation of holdings goes on increasing. It adversely affects the economic development of the country.

11. Impact on Maternity Welfare:

In India, population explosion is the result of high birth rate. High birth rate reduces health and welfare of women. Frequent pregnancy without having a gap is hazardous to the health of the mother and the child. This leads to high death rate among women in the reproductive age due to early marriage. Hence to improve the welfare and status of women in our society, we have to reduce the birth rate.

12. Pressure on Environment:

Population explosion leads to environmental degradation. Higher birth rate brings more pollution, more toxic wastes and damage to biosphere. Briefly speaking, population explosion hinders the economic development. It should be controlled effectively.