Where are you?
  • Austria
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Guernsey
  • Ireland
  • Italy
  • Jersey
  • Luxembourg
  • Malta
  • Netherlands
  • Norway
  • Portugal
  • Spain
  • Singapore
  • Sweden
  • Switzerland
  • United Kingdom
  • Rest of World
It looks like you’re in
Not your location?
And finally, please confirm the following details
I’m {role} in {country} and I agree to comply with the terms of the website.
You are viewing as from Change

India targets demographic dividend

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

Each hour in India sees the arrival of a staggering 3,500 new births − 35 times the number of those born hourly in the United Kingdom. Indeed, India's population has grown by over 1 billion people since 1950, the year in which the UN first began keeping population records. In that year, and every year until now, China has been the largest country by population on the planet. No longer. 

While it's a tricky business to get exact numbers when dealing with demography − India hasn't had a census since 2011 − the UN believes that this year India will overtake China as the most populous country. Moreover, this demographic handing of the baton from China to India has come earlier than expected, due to both faster than anticipated growth in India and an earlier than forecast peak in China. In 2019, estimates saw this moment occurring in 2027.

Although the total population numbers are currently very similar, the overall picture of the Chinese and Indian populations could not be more different. India has one of the youngest populations in the world with a median age of 27.6 (China's is 38 and the UK's 40). Indeed, the sheer scale of India's population means that a remarkable 250 million people sit in the 'youth' cohort (15-25 years), meaning that India's working age population (15-64 years) is expected to hit 1 billion in the next decade with 10 million people added to the workforce each year (against China losing 1.6 million workers per year).

As well as a very different demographic structure, India and China also differ notably in the context of urbanisation. India is a much more rural economy with a lower degree of educational attainment − around one in three Indians live in cities, compared with more than half of Chinese. Although China's population is ageing and shrinking, it has the advantage that older, less-educated workers are being replaced with younger, more-educated (and healthy) ones, which is supportive of productivity gains.

The combination of existing scale and further growth in the Indian working age population clearly offers both extraordinary opportunities and challenges. Rising incomes, especially among the urban population, allows people to access new products and services, whether white goods for the home, personal and lifestyle products such as clothes, cosmetics and jewellery, or motorcycles or cars. Meanwhile the vast rural population will be creating demand for more basic products in the food and personal care categories where the key challenge for companies to navigate is the distribution channel across such a large country with differing regional preferences.

It is at this point where policy matters − many of the key reforms implemented by the current government under Narendra Modi have sought to modernise the economy in order to meet the challenge of creating sufficient jobs to match the huge supply of labour. The Goods and Services Tax of 2017 was brought into effect in order to greatly simplify cross-border movement of goods, subsuming a byzantine system of taxes and levies, customs duties and surcharges. While ‘Digital India’ is an ongoing programme to connect rural areas with high-speed internet and open the country's digital infrastructure to all, including the Direct Benefit Transfer, which transfers subsidies directly to people through bank accounts.

This in turn has brought significant numbers into the banking system for the first time − supporting the growth of the financial sector in India, which is itself increasingly driven by digital banking and runs hand-in-hand with the growth of the e-commerce sector. Penetration of financial products remains very low, with less than 10% of household assets in equity markets/investment funds, with insurance penetration even lower; the increase in access to financial services is just one of many examples of where Indian companies are well placed to offer the services required by an increasingly aspirational middle class. India's increase in per capita income should move it from lower middle-income to upper-middle income status by the end of the decade.

It is this 'New India', increasingly driven by high-tech and value-add exports that has dramatically led to its post-Covid recovery, with a concerted policy effort to push India up the manufacturing value-chain and take advantage of global supply chains looking to diversify away from sole-reliance on China (the so-called China+1 approach).

India has been sharply gaining market share in the high-tech manufacturing exports segment over the past half decade − Apple now makes approximately 6% of its iPhones in India, with significant plans to increase production further. A huge variety of tech start-ups have emerged in recent years across all sectors including financial services, e-commerce and food delivery, creating a digital economy that can allow all industries to increase productivity − using digital infrastructure to allow small and medium enterprises to act like large ones through access to capital, technology and larger end markets. This process is already underway and underpins India's world beating growth of 7.7% over 2022/23. 

The so-called demographic dividend is not a given − demographic destiny must be met and supported by strong economic policy that generates sufficient jobs. Given the sheer scale of the growth in India's workforce over the next decade, this will be no easy feat. However, the actions of the current government in creating the conditions for growth, modernisation and digitalisation of the economy and a platform for a new breed of entrepreneurial, tech-oriented companies to develop, offers a compelling reason why we believe the coming 10 years will be India's decade – in both demographic terms but also in terms of economic success.

Understand common financial words and terms See our glossary

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

The portfolio is invested in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in the Fund involves foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The Fund may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility.


This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.

Ewan Thompson
Ewan Thompson
Ewan joined Liontrust in October 2019 as part of the acquisition of Neptune Investment Management, where he started his investment career. Prior to joining Neptune in 2006, he worked as an editor for Yale University Press. 

More from the team

See all related
Ewan Thompson Ewan Thompson
India’s general election: the world’s largest democratic vote An electoral process on a near-unimaginable scale
icon 9 May 2024
Good and services
Imran Satter Imran Sattar
Finding magnificent businesses in the UK
icon 7 May 2024
A world of opportunities in the UK stock market
Global Infusions Podcast
The Business of Defence
Listen on: Google Podcast
In this episode of Global Infusions, Tom welcomes back Hong to explore the business of defence. From sanctions to drones, the consequences of war are legion.
Thomas Smith Thomas Smith
Nearshoring offers golden opportunity for Mexican economy Fund manager Thomas Smith takes a look at the unique opportunity for the Mexican economy from nearshoring as a broad range of sectors and companies stand to benefit from supply chain reorganisation
icon 21 March 2024
Imran Satter Imran Sattar
Why there are plenty of opportunities among UK equities
icon 14 March 2024