In today’s Finshots, we dive into the declining birth rates and ageing population in India’s southern states and what we can do about it.

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The Story

We have a population problem, and it’s not about having too many people but the opposite. Our population is shrinking! You might think, “Wait, aren’t we the most populous country with over 140 crore people, Finshots?!” And you’d be right. But look a little closer, especially at our southern states, and a different story emerges — a brewing crisis of declining birth rates and a rapidly ageing population.

But before we get into the details, let’s quickly understand what’s considered a ‘good’ population number.

To keep a population stable, each woman needs to have an average of at least 2 children — or 2.1, to be more precise over their reproductive years. This number, called the replacement-level fertility (RLF) or total fertility rate (TFR), is crucial. Anything above this number means a stable or growing population, while anything below it spells a prolonged decline in the young, working-age population. In India, the TFR was 6.1 in 1950, dropped to 4.6 in 1980 and went on to decline to 1.9 in 2021. And today, this decline is exactly what some of our southern states are struggling with.¹

To put things in perspective, Kerala and Tamil Nadu have a TFR of 1.8, while Andhra Pradesh and Karnataka lag behind at 1.7.² And by 2036, nearly 19% of Andhra Pradesh’s population will be 60 years or older. And as per the Ministry of Health and Family Welfare’s estimates, the working-age group (15-59 years) will drop to just 65%.³ This trend has the state governments worried. And it’s not just about a shrinking population but also about losing political influence.

Look, as the population in the southern states dwindles, the risk of losing a few parliamentary seats looms large. You see, in 2026, the number of seats in the Lok Sabha, India’s lower house of Parliament, will be reshuffled based on each state’s projected population as per the delimitation process. And if Tamil Nadu and Andhra Pradesh have fewer people than the northern states, they could lose a few parliamentary seats. Fewer seats mean less say in national decisions, and that could tip the scales in favour of the more populated regions.⁴

But beyond politics, a declining birth rate has deeper economic consequences. And a growing ageing population only makes matters worse.

As people age, economies tend to slow down. Japan is a cautionary tale with a rapidly ageing population and stagnant economic growth. From 1991 to 2003, Japan’s GDP crawled at an average rate of just 1.14% per year. Sure, there were other factors at play, but having fewer young people to drive innovation was a major drag.

Undeniably, younger workers are the engine of new ideas, and when the workforce shrinks, the innovation tank runs low. Stanford economist Charles Jones found that fewer people generating ideas means fewer ideas overall. ⁵ And with it, economic growth. An ageing population also means increased expenses for pensions, healthcare and other care needs. And with fewer young people in the workforce, who’ll pay the taxes to fund all this? Fewer taxpayers lead to less taxes which further boils down to less government spending on infrastructure and other growth initiatives.

So yeah, there’s a vicious cycle behind the low birth rate and ageing population in the mix. And to tackle the problem, some states are considering ways to boost birth rates.

Just last week, Andhra Pradesh’s Chief Minister, N Chandrababu Naidu, said his government is working on a law to incentivise state residents to have more children. But could this really be a sustainable solution?

See, countries around the world are grappling with the issue of people not willing to have babies, no matter the incentives. Taiwan for instance, has spent billions on incentives, yet its fertility rate is just 0.87. Austria extended the duration of maternity leave. Germany poured huge sums of money into childcare investments. And Russia even started handing out cash payments to larger families.⁶ And South Korea? They have spent over 1% of their GDP annually on tax breaks, maternity care and even state-sponsored dating events, but their fertility rate is still only 0.81.⁷ Even Sweden, known for generous parental support, is seeing birth rates fall. It turns out that people will decide when or if they want kids at all, regardless of incentives offered.

And with crises like wars, climate change and the high cost of living, especially for education and healthcare, starting a family might just not be on top of the priority list for many. Declining fertility rates also reflect that women now have more control and agency over how many children they want, if any at all.

So what’s the way out, you ask?

Well, there are two broad paths we could consider. One, keep people healthy and working longer.

Take Singapore for instance, one of the fastest-ageing countries. It’s betting on extending working life. The government is gradually raising the retirement age, encouraging companies to rehire older employees and investing heavily in healthcare to ensure a healthy, productive senior workforce.

The second option is migration. For India’s southern states, inter-state migration might be the answer. Our northern states have a younger population and migration from the north could help bridge the demographic gap in the south. This trend is already underway. Southern states are benefitting from an influx of younger workers without even bearing the costs of raising them.

And this isn’t anything new.

The US has long used migration as a growth engine. Immigrants have been the lifeblood of innovation and productivity there.

So yeah, the population problem isn’t about having too many people.

In some places, it’s about having too few. Fixing this won’t come from just handing out incentives for bigger families. It needs bold thinking, an openness to migration and policies that truly adapt to shifting demographics.

What do you think?

Until then…

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📢India’s mutual funds are sitting on nearly ₹2 lakh crores in cash! But why? Find out in this episode of FinshotsTV!

Story Sources: The Indian Express [1] [3]; Business Standard [2]; The Print [4]; The Economist [5] [7]; The Vox [6]

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