India’s aging population will have to reshape the economy as birth rates fall below replacement: Moody’s | Today’s news

New Delhi: India is likely to have a much older population later this century as its age structure begins to shift after fertility has fallen below replacement, Moody’s Ratings said in a report on Tuesday.

Although India’s population remains relatively young, the country’s birth rate has fallen below replacement and its age structure is beginning to change, paving the way for a much older population in the coming decades, Moody’s said. Countries with the steepest declines in birth rates are likely to age the fastest, he added.

This shift is part of a wider global demographic transition. More than 70% of the world’s population now lives in countries with fertility rates at or below replacement, Moody’s said. The global fertility rate has fallen from 4.9 children per woman in 1950 to about 2.2 today, which is only slightly above the reproductive rate of 2.1.

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“Declining fertility is now changing that picture,” Moody’s said, referring to the long-term contribution of population growth to economic growth and creditworthiness. Fewer workers will limit productive capacity, while fewer households and consumers will weaken demand, requiring countries to rely more on productivity to sustain growth.

For India, the demographic transition could have implications far beyond population growth. Moody’s said aging affects labor supply, consumer demand, public finances and financial markets. As societies age, fewer workers must support a growing number of retirees, putting pressure on labor markets, government finances and health care systems even before the population begins to decline.

Along the demographic path

The rating agency said India is following a demographic path already visible in parts of Europe and East Asia. Population pyramids in countries such as India and Brazil are gradually shifting from structures dominated by younger cohorts to an aging population.

Moody’s said aging will affect the economy through four channels: labor supply, public finances, consumer demand and savings, wealth and capital markets.

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Slower labor force growth could reduce potential economic growth if not offset by higher productivity, while skill shortages could cause labor shortages and pressures on wages in occupations that are difficult to automate. Aging would also increase pressure on pensions, health care and long-term care.

Consumer demand is also likely to change as the population ages. Moody’s said an aging population tends to consume differently and often less, increasing demand for healthcare, retirement services, assisted living, asset management and age-friendly housing, while creating headwinds for sectors linked to household formation, education and younger consumers.

It is already seen in China

The demographic transition is already visible in China, where the proportion of people aged 65 and over has doubled from 7% to 14% in about 20 years, Moody’s said. Brazil, Thailand and Turkey are also on a similar trajectory, with emerging markets facing the costs of aging at lower income levels than advanced economies that have aged earlier.

In June 2025, Sanjeev Sanyal, a member of the Prime Minister’s Economic Advisory Council, warned in an interview with Mint that India’s fertility decline was no longer limited to southern states and had become a nationwide trend. Sanyal said India is entering a demographic transition similar to that experienced by China, Japan and South Korea.

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Moody’s also said pension systems, health care provision and fiscal frameworks will need to adapt as dependency rates rise.

However, the rating agency warned that these measures cannot reverse basic demographic arithmetic. Pronatalist policies – including cash bonuses, recurring allowances, tax breaks, housing and mortgage subsidies, childcare and parental leave – have generally failed to deliver sustained increases in the birth rate, she said.