The following points highlight the six main effects of population growth on the Indian economy.

Effect # 1. Population Growth and Income Growth:

During 1950-51 and 1999-00, India’s national in­come (at 1993-94 prices) increased by 4.4% per annum. But population increased at the rate of 2.2%. The net result has been modest 2.1% in­crease in per capita income.

Thus, in spite of plan­ning, India has failed to achieve a satisfactory growth rate. In fact, rapid growth of population has acted as the main obstacle to India’s material progress during the entire plan period. What is surprising is that no really effective measure has been adopted to slow down the rate of growth of population.

Effect # 2. Population and Food Problem:

In 1798, T. R. Malthus wrote his famous essay on popula­tion and predicted that, if left unchecked, popula­tion growth would exceed the rate of growth of food supply. Any imbalance between the two is a symptom of overpopulation. No doubt the Green Revolution increased agricultural production.


Consequently the food problem that the country faced in the 1950s and 1960s has become a thing of the past. But, food problem is likely to arise again mainly due to rapid growth of population. At present due to satisfactory food stock the Gov­ernment occasionally imports food-grains, in order to maintain a buffer stock. If country is to reach self-sufficiency in food-grains, population growth has to be checked.

Moreover, due to population growth, per capita net availability of food-grains per day has to fall in India. No doubt the per capita availabil­ity of food-grains per day increased from 431 grams in 1956 to 469 grams in 1961. It remained un­changed at that level in 1971. But it fell subse­quently to 435.8 grams in 1981.

It again increased slightly because of bumper crops in some of the years. It was 510.1 grams per day in 1991. But it fell to 476.2 grams in 1996. It again increased marginally in 505.5 grams per day in 19.97. It again fell to 466 grams in 2000. Thus, the marginal in­crease in per capita availability of food-grains in some of the years and drop in other years is mainly due to population growth.

Moreover, due to unchecked growth of popu­lation in rural areas, total demand for food is in­creasing. But, at the same time, per capita food consumption is falling. So, the quantum of mar­ketable surplus is declining in spite of satisfac­tory crop in most of the years in the recent past.


Thus, in the face of rising population, a fall in per capita food consumption cannot raise the genera­tion of marketable surplus. Indian planners and policymakers must take note of this reality and adopt some harsh measures to reduce the size of family, especially in rural areas.

Effect # 3. Population and the Dependency Burden:

Due to population, per capita availability of capi­tal falls. This reduces labour absorption and wages remain low. Population creates three problems— capital shallowing, age dependency and invest­ment diversion. In developing countries like In­dia the percentage of people under the age of 15 is quite high—almost half of the total population. A high dependency burden implies a high propor­tion of unproductive consumers.

These people do not make any contribution to society’s output but consumes a major portion of it. They not only cre­ate the problem of disguised unemployment but reduce the rate of saving and capital formation so essential for the growth process. There is diver­sion of investment into unproductive consump­tion.

Effect # 4. Population and Unemployment:

Popu­lation growth obviously implies an increase in the size of the labour force. In a country where most people depend on agriculture, the scope for addi­tional employment creation in the agriculture sec­tor is limited. In fact, rapid growth of population and inelasticity of supply of land have created the problem of disguised unemployment.


The lack of industrial employment—because purchasing power is low—makes for high unem­ployment rates as well as political unrest. The political unrest, in turn, inhibits economic devel­opment by increasing risks associated with capi­tal investment.

In fact, the number of applications on live register of employment exchanges increased from 3 lakhs in 1950-51 to 178 lakhs in 1980-81 and 412 million in 2000-01. Thus, despite planning and various industrialisation programs, the number of unemployed is on the rise in India’s growing unemployment. The root cause of this is rapid population growth.

Effect # 5. Population and the Burden on Social Services:

Due to population growth the housing problem has become acute, particularly in urban areas. Moreover, there is tremendous demand for land for construction purposes. It has been esti­mated that shortage of housing is 23.1 million units. Consequently, people are forced to live in congested areas resulting in various health haz­ards. The health problem, on the other hand, dam­ages efficiency of labour.

Moreover, with population growth, the de­mand for medical care is bound to increase. So the government has to spend a huge amount of money for setting up hospitals, medical colleges (to train up the required number of doctors), clin­ics, and so on. Yet, there is shortage of such fa­cilities in LDCs like India because of the fact that demand for medical care (due to population growth and growing urbanisation) increases faster than its supply.

Effect # 6. Population and Saving:

Growth of popu­lation reduces per capita income. Moreover, in India, the capital-output ratio is not only high but is increasing. This implies that we are not able to utilize our capital resources efficiently. At present it is around 4.3. This means that capital of Rs. 430 is required to produce output of Rs. 100.

So, any additional saving that is generated is likely to be utilised to neutralise the effect of a rise in capital-output ratio. Many economists consider this to be a waste. And, because of this, very little capital is left for expansion of society’s produc­tion capacity and, through it, raising the growth rate and, finally, bringing prosperity to the peo­ple.

The following quote from India’s Third Plan (1961-1966) is quite relevant here:

“In an under­developed economy with very little capital per per­son, a high rate of population growth/makes it even more difficult to step up the rate of saving which, in turn, largely determines the possibility of achieving higher productivity and incomes. Moreover, for a given investment, a large propor­tion will need to be devoted to the production of essential consumer goods at the expense of in­vestment goods industries thereby still further slowing down the potential rate of growth.”