Even China Faces Low Birthrate... Two Countries Emerging with Explosive Population Growth

Prospects for Promising Investment Destinations in India and Indonesia

India and Indonesia, which have recently shown explosive population growth, are analyzed to be good choices for emerging market investors. This is because the rapidly increasing working-age population is expected to drive economic growth in the future. This contrasts with the global trend of population decline, where even the 'population giant' China is facing low birth rates and aging population crises.

Bloomberg reported on the 26th (local time), citing global asset management firms such as Fidelity International and BlackRock, that demographic characteristics are beginning to play a major role in investment decisions, benefiting India and Indonesia.

The World Bank (WB) expects the populations of India and Indonesia to increase by 15.9% and 13.4%, respectively, by 2050 compared to this year. During the same period, China's population is projected to decrease by 8.5%, and the Group of Seven (G7) countries are expected to grow by only 1.3%.

By 2050, the total dependency ratio (the number of dependents per 100 working-age people) in India and Indonesia is estimated to be 49.3 and 52.4, respectively, much lower than China (71.1) and the G7 (77.3). This means that the economically active population will be significantly larger than in major countries.

In particular, the young labor force in India and Indonesia is expected to surge, driving economic growth. BlackRock strategist Jean Boivin stated, “A surge in the working-age population generally leads to higher future earnings growth.”

Buoyed by this optimism, economic growth forecasts for India and Indonesia are also being revised upward. The Indian Ministry of Finance has projected a real gross domestic product (GDP) growth rate in the 7% range for this year and estimated that the GDP size could reach $7 trillion by around 2030. Indonesia is also expected to maintain growth in the 5% range this year. Prabowo Subianto, the president-elect of Indonesia who will take office this October, has set a goal to achieve annual GDP growth of up to 8% in the future.

The economic growth effect driven by population increase is also seen as a factor leading the stock markets of India and Indonesia. Bloomberg reported that India's Nifty 50 index is expected to record nine consecutive years of gains, and Indonesia's Jakarta Composite Index hit an all-time high last March.

However, experts advise that structural reforms such as labor market flexibility and promotion of foreign investment must follow to maximize the population effect. Ian Samson, a fund manager at Fidelity, emphasized, "Structural reforms in India and Indonesia can maximize economic growth through employment and productivity."