The influence of large increases in population, year after year, is highly unfavourable for the growth of output. This happens because the factors of production cannot contribute fully to the growth.
In fact, in doing so there are inhibitions of several types. We discuss below the effects of a rapidly rising population on such basic factors of growth as natural resources, labour-supply and capital formation.
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1. Natural Resources:
The effect of population rise on natural resources may be usefully dealt with in two parts. One, when we take the land area of the country only. Two, when one examines these resources in the wider sense to include all that is given to man by nature.
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2. Land Resources:
In considering the land area in relation to population, one considers the density of population. This is very high and has risen rapidly in the past. According to the 2001 Census, the density of population in the country is 324 per sq. km. as against 117 per sq. km. in 1951. Per capita cultivable land has declined rapidly.
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It is a little less than 0.17 hectare as against 0.33 hectare in 1951. The rising pressure of population on agricultural land has led to serious consequences. First, it has obstructed improvements in agriculture.
The sub-division and fragmentation of agricultural holdings are the direct results of this pressure on land. It has also sapped the capacity and willingness of cultivators to improve upon agricultural practices. Second, in the absence of improvements in agriculture, there has not been any large increase in the amount of farm-work.
As a result, we find widespread disguised unemployment and underemployment in the agricultural sector. The third consequence is associated with the widening gap between the fast rising demand for various food articles on account of growing population and slower rise in the output of food-articles, partly caused by rise in population.
In these circumstances the country has often been forced to import food on a large scale, causing serious deficits in balance of payments.
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3. Natural Capital:
Large population does much harm to the capital given to us by nature. In fact, much degradation of nature’s capacity to support life has already taken place. No doubt, in the developed countries the same has happened. But in these countries it is the wrong kind of development that has impaired the natural capital.
However, in India the large population itself is an important cause in reducing the nature’s resources. Rightly do the Malthusian economists argue that the world of nature is finite and has a given productive capacity? As such it cannot accommodate a population larger than its capacity.
In fact, the poverty of the people has also caused much deterioration to the natural resources. The excessive cultivation of land, which it entails, has done much harm to the agricultural soils causing yields to decline.
Forests, too, have been degraded by large-scale cutting of trees by the poor for its use as firewood. As a result the forests, which are the richest ecosystems in biomass and biodiversity on land, have been eroded to a large extent.
4. Labour Supply:
On the face of it, a large-sized population and a large rise in it should be welcome because it will mean a large labour-force, and a rapidly rising one. This should result in large production and a rising one.
In advanced countries an increase in this factor has contributed significantly to economic growth. In the Indian conditions this, however, does not hold good. On the contrary, a large rise in the labour supply creates serious problems for the economy.
5. Unhelpful Factor:
A rapidly rising population on a large base, far from contributing to growth, has in fact burdened the poor economy in more than one way. Firstly, the problem arises because it takes a long time for children to enter the age-group of labour (15- 60 years). Till then a high birth rate will add to the children, thereby raising their proportion in the total population.
Secondly, there is every possibility that the workforce may actually be reduced. Women, for example, will have to spend more time looking after their children, thus reducing labour-time available for productive activities.
6. Worsening of Employment Situation:
The increase in labour supply will make the already bad employment situation worse. To overcome the major problem underemployed and unemployed have to be provided with more work.
The growth experience of the country suggests that the rise in the labour force has been larger than the absorptive capacity of the economy. Hence, increase in population from the angle of augmenting the labour- force is not desirable.
7. Capital Formation:
A high rate of capital formation is crucial to the development of the country. But the fast growing population makes it difficult to achieve this objective. It, in fact, reduces resources for capital formation. It does this in the following two ways.
8. Eats away Investment Resources:
The investment resources used for maintaining the present low level of per capita income of the rising population is a minus item which reduces the total resources for capital formation. Called ‘demographic investment’, it is just to sustain the additional population at the existing level of per capita income.
Economist, George C. Zaidan has estimated that for a country like India, ten per cent capital formation is essential to keep the per capita income at the same level.
Over and above this demographic investment, there is the ‘economic investment’ for raising the per capita income. How much additional investment is required for this purpose depends upon the objective.
But with lower population growth, the economic investment becomes feasible and high growth a practical proposition. In other words, with high population growth, the race of capital formation to raise growth rate becomes a very difficult task.
9. Lowers Saving:
Fast population growth also adversely affects savings and therefore capital formation. This happens because of the rise in consumption that the rapidly growing population involves. The addition to population means additions to the large number of existing consumers.
With an increase in the number of consumers, even if the per capita expenditure remains the same, the total consumption will rise. Given the level of income, an increase in consumption means less saving. In this connection one may suggest that the way out of this problem is the use of foreign saving.
There is no doubt that foreign capital doe’s play and has played an important part in the development of underdeveloped countries like India, at least in the initial stages of development. But the foreign capital is not available, to any extent, and on really soft terms. Generally it has many, and often stringent, conditions tagged to it.
The alternative of foreign direct investment, though a better proposition than loans, cannot be very helpful. This is for the simple reason that this can never be large enough to substitute for domestic saving substantially. All in all, the consequences of a rapidly rising population are certainly unfavorable for capital formation.