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2023 | OriginalPaper | Chapter

3. India’s Economy in the Twenty-First Century: Role of State-Differentiated Demographic Dividend

Authors : D. K. Srivastava, Muralikrishna Bharadwaj, Tarrung Kapur, Ragini Trehan

Published in: India’s Contemporary Macroeconomic Themes

Publisher: Springer Nature Singapore

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Abstract

A number of recent studies have highlighted that in the twenty-first century, India is slated to become the global growth leader, maintaining relatively high growth rates over several decades. This is estimated to result in India becoming the second largest economy in terms of its size of GDP as measured in PPP terms by 2039–40 and the largest economy by 2051–52 (EY, 2023). Even in market exchange rate terms, India is estimated to become the second largest economy by 2075 (Goldman Sachs, 2022). This robust growth performance is largely dependent on the interface of India’s unfolding demographic dividend with its saving and investment rates. Saving rate tends to be high when dependency rate is low and the available population in the working age group is productively employed. In this paper, we have highlighted that the demographic profile in the next few decades is expected to be noticeably different across Indian states. States that are at present considered relatively more developed in economic terms are also the states that would be aging ahead of the states that are presently less developed. To some extent, the growing discrepancy in the age profiles of different states would be moderated by inter-state migration. Using the differential features of the evolution of age structure across states, policymakers both at the central and state levels can orient their policies to maximize overall and state-specific growth by finetuning over time, their expenditure prioritization with respect to education, health, and skill building. In terms of urbanization and spread of infrastructure facilities also, suitable messages can be derived for optimal allocation of infrastructure investment across space and over time.

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Appendix
Available only for authorised users
Footnotes
1
‘Amrit Kaal’ is a term drawn from Vaidic astrology, indicating a uniquely auspicious period.
 
3
For details on methodology, see EY (2023).
 
4
Estimated using HP-Filter in E-Views.
 
5
For cross country comparisons, OECD baseline scenario were used for countries other than India. For India, simulation S3 is being used as drawn from ongoing studies at EY.
 
6
A per capita income threshold of US$13,205 is considered synonymous with reaching a developed country status (World Bank, 2023); https://​datahelpdesk.​worldbank.​org/​knowledgebase/​articles/​906519-world-bank-country-and-lending-groups.
 
7
Srivastava et al. (2022).
 
8
GDP based on purchasing power parity (PPP) share of world total, sourced from IMF World Economic Outlook (October 2022).
 
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Metadata
Title
India’s Economy in the Twenty-First Century: Role of State-Differentiated Demographic Dividend
Authors
D. K. Srivastava
Muralikrishna Bharadwaj
Tarrung Kapur
Ragini Trehan
Copyright Year
2023
Publisher
Springer Nature Singapore
DOI
https://doi.org/10.1007/978-981-99-5728-6_3