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 countries 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 search 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 noted that the demand or market for goods increase 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. Having ruled out the beneficial effects of population growth in the context of the Indian economy we discuss below how population growth in India retards economic development.
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 of capital goods become possible only with higher rate of investment and a higher role of investment, of turn, is possible if the rate of savings is high.
Now, increase in population by adding to the number people whose requirements of “feeding and clothing” have to be met which 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.
He 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. 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 facilitate it.
2. Investible Resources and Raising Per Capita Income:
While on the one land 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 capital income. Suppose population of a country A is increasing at 1 per cent per annum and that of a country B at 3 per cent per annum.
Given that capital-output ratio is 4: 1, then country A would have to invest 4 per cent of its current income to maintain its per capita income, while country B would have to invest 12 per cent of its current income even to maintain its per capita output.
Thus, when the population is increasing at a rapid rate, comparatively larger investments are needed to maintain the current level of income. Thus, given the scarcity of investible resources adequate resource are not left to raise per capita income significantly.
3. Lowers 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 do 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 given in Table 41.2. It will be seen from this table that the annual growth in per capita income has been much less than the annual growth rate in that 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.
Table 41.2. Annual Average Growth Rate (at 2004-05):
Annual Average Growth Rate (at 2004-05)
However, since 1991 population growth rate has been less than 2 per cent, it was 1.93 per cent between 1991 to 2001 and 1.6 per cent between 2001-2011, on the one hand and growth rate of national income was much higher on the other (see Table 41.2).
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 Eighth 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
where g stands for the rate of growth of per capita income, I represents rate of investment, a 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, la 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.
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 pre-requisite 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.
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