India's Fertility Rate Below Replacement, Will Face Demographic Shift Similar to China: Report

New Delhi: A report by Moody's Ratings on Tuesday (September 29) said India is likely to have a much older population during the latter half of this century, owing to the country's fertility level falling below replacement level, with implications for labour supply, economy, financial markets and public services.

Although India remains relatively young, its evolving age structure points towards a larger elderly population in the coming decades, said Moody's. It added that countries presently experiencing the sharpest fertility declines are likely to age most rapidly.

More than 70% of the world's population lives in countries with fertility rates at or below replacement level, the report said. The global fertility rate has in turn declines from 4.9 children per woman in 1950 to around 2.2 currently, very near to the replacement rate of 2.1.

Economic impact

Moody's report identified four channels – labour supply, public finances, consumer demand and savings, wealth and capital markets – through which ageing populations could impact economies.

A slower-expanding workforce could constrain economic growth under productivity improves, it said. Importantly, labour shortages could become prevalent in industries that are more difficult to automate.

At the same time, a growing older population would place more pressure on pension systems and healthcare sector. Moody's said governments would need to adapt fiscal frameworks and public services accordingly as dependency ratios rise, due to an increase in the number of retirees.

An ageing population will also drastically alter consumption patterns. Demand could increase for healthcare, retirement, assisted living, wealth management and age-friendly housing sectors, while sectors dominated by younger consumers could face a downfall, per the report.

A wider demographic transition

The report calls attention to a broader demographic shift already visible in parts of Europe and East Asia, with population structures gradually shifting away from younger age groups.

It cites China as an example of the transition already underway. The share of China’s population aged 65 and above has doubled from 7% to 14% in about 20 years, Moody’s said. Brazil, Thailand and Türkiye are also following similar trajectories.

Policy limitations

In a June 2025 interview with Mint, Sanjeev Sanyal, a member of the Economic Advisory Council to the Prime Minister, said the decline in India's fertility rate was no longer limited to southern states and has become a nationwide trend.

Under the current situation, governments must deliberate on measures such as cash incentives, recurring allowances, tax relief, housing and mortgage subsidies, childcare support and parental leave to encourage childbearing, said Moody's.

Regardless, the report warned that the measures cannot reverse the underlying demographic arithmetic, emphasising the need for countries to formulate ageing-friendly policies.

The Wire is now on WhatsApp. Follow our channel for sharp analysis and opinions on the latest developments.