India faces demographic shift as fertility rates fall below replacement level

India is entering a new demographic era characterized by an aging population and slowing population growth, as fertility rates fall below the replacement threshold of 2.1 children per woman, Moody's Ratings said in a report on global demographics released Tuesday.

The shift marks a fundamental change in India's economic trajectory. For decades, population growth has served as a significant tailwind for economic expansion and improved creditworthiness. However, falling fertility rates are upending this dynamic, presenting both challenges and opportunities for policymakers and businesses.

The decline in fertility has far-reaching implications. A shrinking working-age population will constrain productive capacity, while fewer households and consumers will dampen aggregate demand. To maintain economic momentum, India will need to substantially boost productivity and efficiency across sectors, rather than relying on population-driven growth.

The global context underscores the magnitude of the shift. The worldwide fertility rate has plummeted from 4.9 children per woman in 1950 to approximately 2.2 today. More significantly, over 70 per cent of the global population now resides in countries where fertility rates have reached or fallen below replacement level, indicating a synchronized aging trend among many of the world's largest economies.

For India, managing this demographic transition will require focused attention on workforce productivity, skill development, and innovation to sustain growth in the decades ahead.