JAMIA MILLIA ISLAMIA

ECONOMICS ASSIGNMENT

TOPIC – IMPACT OF POPULATION ON

ECONOMIC DEVELOPMENT

SUBMITTED TO – MR. BILAL KHAN SIR

SUBMITTED BY– SHUSHANT KUMAR

COURSE – B.A.LLB (HONRS) ( S/F)

CLASS - 1ST YEAR ( II SEMESTER )
CLASS ROLL NO. – 58
BATCH – 2019 – 24
INTRODUCTION

Population may be considered positive hindrance in the way of economic development of a

country. In a 'capital poor' and technologically backward country, growth of population reduces
output by lowering the per capita availability of capital. Too much population is not good for
economic development.In underdeveloped countries, the composition of population is
determined to increase capital formation. Due to higher birth rate and low expectation of life in
these countries, the percentage of dependents is very high. Nearly 40 to 50 per cent of the
population is in the non-productive age group which simply consumes and does not produce
anything.

In under developed countries, rapid growth of population diminishes the availability of capital
per head which reduces the productivity of its labour force. Their income, as a consequence, is
reduced and their capacity to save is diminished which, in turn, adversely affects capital
formation.

The existing state of knowledge does not warrant any clear-cut generalization as to the effect of
population growth on economic development in today's less developed areas. Some theoretical
analyses argue that high population growth creates pressures on limited natural resources,
reduces private and public capital formation, and diverts additions to capital resources to
maintaining rather than increasing the stock of capital per worker. Others point to positive effects
such as economies of scale and specialization, the possible spur to favorable motivation caused
by increased dependency, and the more favorable attitudes, capacities, and motivations of
younger populations compared with older ones. The actual evidence on the association between
growth rates of population and per capita income does not point to any uniform conclusion,
though the true relationship may be obscured in a simple two-variable comparison. None of this
means that per capita income growth, currently and in the past, would have been the same if
population growth rates had been markedly higher or lower. But it is possible that the effect of
population growth on economic development has been exaggerated, or that no single
generalization is justified for countries differing as widely in growth rates, densities, and income
levels as do today's less developed areas. Clearly there is need for more intensive re search on the
actual experience of nations, currently and in the past. We also can’t ignore the fact that it is
necessary to mention that by economic development we mean not only increase in national
income (GNP) or per capita income, but also reduction in unemployment as a result of the
growth of employment opportunities and reduction in poverty and inequalities of income. Since
economic growth depends on rate of saving and investment and productivity of labour.1

Impact of population growth on economic development

Well when we discuss population growth and economic development , two points should be
remembered that it has two face impact one is positive impact and the other one is negative
impact. Actually the relam on which we are able to say is the resources. Resources plays a key
role in deciding that weather the a country with large population will have the positive or
negative impact on its economic growth or say GDP. We can see these differences between
developed an developing countries. In a country with abundant resources and money - a rich
country - perhaps more people is a good thing. But that isn't always the case in countries with
limited resources. Limited resources and a larger population puts pressures on the resources that
do exist. More people means more mouths to feed, more health care and education services to
provide, and so forth. So, population can be a mixed bag.

POSITIVE IMPACT OF POPULATION GROWTH ON ECONOMIC

DEVELOPMENT

It is important to note here that in the present day’s industrialised development countries, in spite
of Mathus’ view to the contrary, population growth was beneficial for economic growth rather
than retarding it. It has been argued by some that population growth leads to the increase in
labour force which is an essential productive resource. By increasing the amount of labour force
population growth will help in producing more output. As someone has remarked, population
growth brings in more hands to work for production and therefore contributes to economic
growth.

1 Rajaram Kalpana (ed.) : Indian Economy, Spectrum Books Pvt. Ltd., New Delhi.
Secondly, it has been pointed out that the increase in population leads to the increase in demand
for goods. Thus growing population means the growing market for goods is enlarged, they can
be produced on a large scale and thus economies of large-scale production can be reaped. The
economic history of the USA and European countries shows that growth of population and
labour force contributed a good deal to the increase in their national output.2

But wheat has been true of USA and European countries may not be true in case of other
countries. Whether or not the growth of population contributes to economic growth depends on
the existing size of population, the available supplies of natural and capital resources, and the
prevailing technology. In the United States, where supplies of natural and capital resources are
comparatively abundant, growth in labour force caused by increasing population raises national
output.

In India where supplies of other economic resources, especially capital equipment, are relatively
scarce, increase in population or labour force does not lead to the employment of all due to
scarcity of capital resources. Unemployed people do not add to national output. As for the
argument that population growth leads to increase in demand or market for goods, it may be
noted that the demand or market for goods increases if the real purchasing power in the hands of
the people increases. The mere growth of unemployed or paupers cannot lead to greater demand
for goods or expansion in their markets.

NEGATIVE IMPACT OF POPULATION GROWTH ON ECONOMIC

DEVELOPMENT

Having ruled out the beneficial effects of population growth in the context of the Indian
economy, how population growth in India retards economic development are explained below:

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 in
capital goods becomes possible only with higher rate of investment. And a higher rate of

2 Dewett K.K. : Modern Economic Thoery, S. Chand & Company Ltd., New Delhi.
investment, in turn, is possible if the rate of savings is high. Now, increase in population by
adding to the number of people whose requirements of “feeding and clothing” have to be met
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. They 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.3

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 facilitates it.

Thus Enke writes, “The economic danger of rapid population growth lies in the consequent
inability of a country both to increase its stock of capital and to improve its state of art rapidly
enough for its per capita income not to be less than it otherwise would be. If the rate of
technological innovation cannot be forced and is not advanced by faster population growth, a
rapid proportionate growth in population can cause an actual reduction in income per capita.
Rapid population growth inhibits an increase in capital per worker, especially if associated with
high crude birth rate that makes for young age distribution.

2. Investible Resources and Rising per Capita Income:

While, on the one hand, 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 capita income. Suppose population of country A is increasing at 1.5 per cent per annum and
that of country B at 2.5 per cent per annum. Given that capital-output ratio is 4: 1, then country A
would have to invest 6 per cent of its current income to maintain its per capita income, while
country B would have to invest 10 per cent of its current income even to maintain its per capita
output. This can be shown by using Harrod-Domar growth formula, namely, g = I/ ν where g is

3 Rajaram Kalpana (ed.) : Indian Economy, Spectrum Books Pvt. Ltd., New Delhi.
growth rate in national income, / is rate of investment as a ratio of national income and ν is
capital-output ratio. The formula can be restated as under –

I= ν.g

For country A with 1.5 per cent annual growth rate of population, its national income must grow
(g) at the rate of 1.5 per cent to keep per capita constant.

For this investment as per cent of national income required to keep per capita constant is given
by-

I=4 x 1.5 = 6 per cent

And for country B whose population is growing at the rate of 2.5 per cent per annum, its national
income must also grow at the rate of 2.5% to maintain its per capita income.

For this, investment required will be-

I= 4 x 2.5 = 10 per cent

Thus, when the population is increasing at a rapid rate, comparatively larger investment is
needed to maintain the current level of income. Thus, given the scarcity of investible resources,
adequate resources are not left to raise per capita income significantly.4

3. Lower 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 does 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 Table given below.

4 Dewett K.K. : Modern Economic Thoery, S. Chand & Company Ltd., New Delhi
It will be seen from the table that the annual growth in per capita income has been much less
than the annual growth rate in the 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.5

However, since 1991 population growth rate has been less than 2 per cent, it was 1.93 per cent
between 1991 and 2001 and 1.6 per cent between 2001 and 2011 on the one hand and growth
rate of national income was much higher on the other shown in the given table. 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 8th 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

5 Rajaram Kalpana (ed.) : Indian Economy, Spectrum Books Pvt. Ltd., New Delhi.
Where, g stands for the rate of growth of per capita income, I represents rate of investment, α
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, Iα 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.6

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 prerequisite 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 = (O – Cf).

Where, O stands for output of food-grains, and Cf for consumption of food-grains by the farmers
themselves. As about 50% 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., Cf in 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 this act as a drag on the growth of output and employment in industries and to ensure food
security to the people.
6 Dewett K.K. : Modern Economic Thoery, S. Chand & Company Ltd., New Delhi
In India, in several years, increase in agricultural output has not been enough and further that the
rapid growth in population tends to reduce the growth of marketable surplus and leads to rise in
food prices. Rise in food prices relative to prices of industrial goods causes unfavourable terms
of trade for industrial sector. This has an adverse effect on industrial development in the country.
Besides, over time food inflation gets generalised and causes the problem of general inflation in
the country which forces Reserve Bank of India to adopt tight monetary policy (that is, raises its
lending rates of interest. The high interest rate discourages private investment and lowers rate of
economic growth).

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
focused on the adverse effect of population growth on the resources available 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.7

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.

7 Misra, S.K., Puri, V.K., Indian Economy, (25 th edn.), 2007, Himalaya Publishing House, Mumbai
6. Population Growth and Unemployment:

Economic development requires that employment should increase adequately so that

unemployment should decrease. Explosive growth in population causes serious unemployment
and underemployment problem in a country. Due to explosive growth in population in India
labour force has been increasing rapidly since 1951. In recent years labour force, which was
estimated 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.8

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

8 Dhingra, I.C., Garg, V.K., Economic Development and Planning in India, (15 th edn.), 2002, Sultan Chand
& Sons, New Delhi
investable resources, it is very difficult to withdraw any significant number of workers from
agriculture so as to equip 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, pesticides require irrigation works, an important capital needed for extension of double
cropping which is a highly employment-generating way in agriculture. Due to lack of invisible
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:

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 125 crore populations estimated
on March 1, 2011, are being added to our population every year as per 2011 population 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 60 years of planned economic development, 400 million people live below the poverty
line in 2011-12 as per the poverty criteria used by the Expert Committee headed by C.
Rangarajan.

Conclusion

The problem of population is really a big threat to the world economy. It's time to take harsh
decisions to handle the population growth because if we not control the population it will badly
effect the economy. We should make our policies accordingly. Its time to come together and
educate people for the betterment of their life. Economic condition play important role in our life
so, it's time to stabilise the condition by controlling the human population.