Several generations of Indians have taken rapid economic growth for granted. It seems that this happy period is drawing to an end.
No economy has managed to hit 8% GDP growth – the government’s target – without a jump in exports. But India’s exports are stuck at the level of 2013. They won’t budge. A protectionist environment worldwide isn’t helping.
We routinely attribute the country’s problems to its large population. But as writer and investor Ruchir Sharma never tires of repeating, it is the increase in the labour force that contributes to half the GDP growth. In other words, a rising population creates growth. The other half of GDP growth comes from an increase in productivity.
The benefits of a rapidly breeding population may already be a thing of the past. The government’s Economic Survey, released yesterday, reveals that population growth is declining far faster than estimated. This is true even in north India. This is so dramatic that over the next 20 years the number of school-going children will crash by 18.4%. This is a stunning statistic in India where we instinctively assume that population will keep growing for ever.
In sum, unless we can sharply increase productivity the coming generation of Indians will have to live with less heady growth.