India will add another 450 million residents over the next four decades taking its population to 1.6 billion in 2051. The patterns of growth however are not uniform across the country. South India where a fifth of the Indian population resides presently will account for 6% of this increase while 90% will be accounted for by the northern and eastern India. In 2051 the population of the northern state of Uttar Pradesh will be 25% more than the combine population of the four South Indian States. This dramatic difference in the demographic pattern has been due to the lag in the onset of female fertility declines across the regions. The foundation for the decline was laid about four decades ago with policies aiming to curb infant mortality and promote female literacy in the region. In the next four decades the rate at which children are born in south India will half while in the northern states the same figure is likely to increase by 50%. Falling fertility and increasing life expectancy shall mould the age structure of the southern society. From seven active age persons supporting every elderly in 2011, the support ratio will fall to two active age person for every elderly in 2051. About 85 Million people shall be past their retirement age, up from about 24 million at present. An average south Indian will be 45 years of age. More than half of the families will be headed by a person of age more than fifty. This transformation in turn will have a strong impact on the economy and the wealth of the region Over the last five decades most of the south has led the country with a strong economic growth. Each successive generation has greater economic opportunity and resources available to them compared to the past.Exapanding economy and librelization have supported 7% average growth rate in the last two decades, however future growth is less likely to be as robust in the region As the demographic dividend wanes out with the retirement of the baby boomer the proportion of workers in the population will fall. The effect of these shifts will be profound on primary and secondary sectors of the economy. In the last two decades, Kerala had negative real agricultural output growth. Industrial sector output from the Karnataka after getting a boost in the 90 has started to wither out. Avenues of growth in the future has to come out of human capital improvement, productivity increase and capital investment.

1. Structural Transformation in South India
On point  2.0
CITY
On point 
STRUCTURAL TRANSFORMATION
IN SOUTH INDIA
Source
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2. On point  2.0
CITY
Structural Transformation in South India
CONTEXT
2011
2011
2051
2051
Population
DEMOGRAPHY
25 Cr
27 Cr
Proportion of Indian
Population
21%
17%
Households
Mean Age
SOCIETAL
Out of 10 persons
Out of 10 persons
9 Cr
44 Years
6 Cr
31 Years
2.5 Aged below 15
1 Aged above 60
1
Aged below 15 years
2.5 Aged above 60 years
Economic Growth
Has been on par with the
Indian economy growing
on an average 8% over the
last decade
Will slow down to an average
rate of 3.5 % per annum
Sectoral Shift
Primary sector accounts
for 16% of the economy,
while secondary and
tertiary account for 23%
and 61%, respectively of
the economy
Primary sector will shrink to a
negligible 4%, secondary sector
will remain at its current level,
while the tertiary sector will
increase to nearly three quarters
of the economy
ECONOMY
Source
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3. Structural Transformation in South India
On point  2.0
CITY
CONTENTS
•
End of the crest
–
–
–
–
–
•
Agenda for future
–
–
Source
Retiring Baby Boomer
Structural Change in the economy: Rise of Services
Labor market forces
Urbanization
Benchmarking with South Asian Economies
Comparative Advantage
Economic Growth
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4. On point  2.0
CITY
Structural Transformation in South India
END OF THE CREST
RETIRING BABY BOOMER
Life Expectancy at birth [Years] in 2011
INDIA
M
F
KARNATAKA
M
F
ANDHRA PRADESH
M
F
TAMIL NADU
M
F
KERALA
Retiring Demographic Dividend
M
F
60
Female
2011
2051
65
70
75
Male
2011
2051
80
Total Fertility Rates 1980 -2050
INDIA
4.5
PROJECTIONS
ANDHRA PRADESH
KARNATAKA
3.5
TAMIL NADU
Fertility rates had started falling in South India much ahead of the rest of the
country. Kerala had been the first state to hit replacement fertility in the early
90’s followed by Tamil Nadu.
KERALA
2.5
Replacement
Fertility (2.1)
1.5
1980
2000
2020
2040
The demographic dividend stuck the southern states early compared to the
rest of the country. This baby boomer population will retire from 2030’s and
significantly increase the depended population
Source Fertility & Life expectancy curves estimated using smoothed data from SRS. Clytics research
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5. On point  2.0
CITY
Structural Transformation in South India
END OF THE CREST
LABOR MARKET
Labor Market Forces
1
Supply: Increase [Decrease] in the size of the native workforce during
consecutive two decades
2011-31
6%
TAMILNADU
-10%
14%
KARNATAKA
-12%
8%
ANDHRAPRADESH
2031-51
-18%
4%
KERALA
-14%
17%
MAHARASHTRA
-11%
21%
GUJARAT
0%
44%
UTTARPRADESH
28%
26%
India
0%
2
As the demographic dividend winds
out the size of the native workforce
of South India shall decline
significantly.
20%
3%
40%
-20%
0%
20%
Demand: Increase [Decrease] in estimated workforce demanded by the industry
TAMILNADU
16%
KERALA
-11%
0%
-18%
KARNATAKA
13%
ANDHRAPRADESH
3%
9%
-2%
India
28%
0%
20%
Source Census, Clytics research
This will pose a severe burden on
economy; growth rates will decline
post 2030. From about a quarter, the
South will shrink to 15% of the
Indian economy in the next four
decades.
In the last two decades, Kerala had
negative real agricultural output
growth. This trend is likely to afflict
other states successively. Tamil
Nadu will start slowing down from
the next decade, while Andhra
Pradesh will start to feel the pinch
of dwindling demographic dividend
from 2030 and Karnataka from early
2040.
-1%
40%
-20%
0%
20%
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6. On point  2.0
CITY
Structural Transformation in South India
END OF CREST
STRUCTURAL CHANGE IN THE ECONOMY: RISE OF SERVICES
Primary
Two fifth of the workforce in South
India is engaged in the primary sector
Andhra Pradesh and Karnataka have
more than half of the workforce
engaged in agriculture while Kerala
has a quarter working in agriculture
Secondary
Secondary sector accounts for 60% of
the Southern economy. And engages
a quarter of its workforce
Primary sector accounts for 15% of the
Southern economy.
Tertiary
Growth in the tertiary sector
has been comparatively
consistent. It is much less
sensitive to droughts, oil
prices, exchange rates and
other exogenous shocks.
In terms of output, the
tertiary sector accounts for
60% of the Southern
economy. Close to three
quarters of Kerala’s output
comes from services.
Jammu & Kashmir
Himachal Pradesh
Punjab
Uttarakhand
Haryana
Rajasthan
Uttar Pradesh
Bihar
Assam
West Bengal
Jharkhand
Orissa
Chhattisgarh
Madhya Pradesh
Gujarat
Maharashtra
Andhra Pradesh
Karnataka
Kerala
Tamil Nadu
JK
HP
PUN
UK
HY
RJ
UP
BH
AS
WB
JKH
ORS
CTG
MP
GJ
MA
AP
KA
KE
TN
Size of the bubble indicates the monthly per capita worker output
Source Computed using the state account statistics published by the Central Statistical Organization and Employment
statistics published by the National Sample Survey Clytics research
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7. On point  2.0
CITY
Structural Transformation in South India
END OF THE CREST
URBANIZATION
South India will continue with the rapid
pace of urbanization. In 2051 South
India is estimated to be more than 60 %
urban, considerably higher than the
rest of India which is expected to be
nearly 50 % urban.
Karnataka and Kerala have to
invest in the port infrastructure and
connectivity to support industrial
growth in the hinterland.
Karnataka should also evaluate
the giving more incentives in
setting up Industrial SEZ along
Mangalore port in preference over
Bangalore.
Vishakhapatnam
Hyderabad
Chennai
Bangalore
Cochin
Transport Linkages have to be
developed to enable clusters to
spread outwards. Average
highway speeds in India are half
of that in the world, thus it takes
over five hours to travel two
hundred kilometres in India
Trivandrum
Northern and Eastern
India, on the other hand, will
be predominantly rural
Source 2001 –11 Census of India 2016-51 Forecasted, Clytics research
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8. On point  2.0
CITY
Structural Transformation in South India
END OF THE CREST
BENCHMARKING WITH SOUTH ASIAN ECONOMIES
Parameter
KE Kerala
JP Japan
T N Tamil Nadu
SK South Korea
AP Andhra Pradesh
TH Thailand
KA Karnataka
CH China
Remarks
859
555
Population Density
484
335
KE
JP
308
TN
91%
Urbanization
SK
TH
319
KA
140
CH
83%
33%
48%
48%
AP
135
34%
39%
51%
Total Fertility Rate
1.8
Life Expectancy
74
1.3
1.4
1.7
83
70
30593
SDP (GDP) per
capita
81
67
2.0
1.4
74
68
4528
4139
JP
1.7
75
25799
8858
7978
KE
Source
1.8
TN
3426
SK
AP
3338
TH
KA
CH
Except for land locked regions, Indian states
have significantly higher population densities
and thus much higher demand at similar level
of resources. Economic growth will increase
the burden further.
Urbanization has been significantly slow in
India. China was 17 % urban in 1971 while
during the same time Karnataka was 25 %
urban. Four decades later Karnataka is 40 %
urban while more than half of China resides
urban areas.
Total Fertility rates in South India have
declined appreciably. Fertility is likely to
decline further based on the experience on
other Asian economies
In the last four decades Life expectancy has
improved by about 20 years. South India,
though has significantly higher life expectancy,
it still lags behind developed Asian
economies.
In a span of four decades South India will
nearly triple its real Domestic product per
capita. However it will take longer to catch up
to output levels of developed economies of
Asia
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9. On point  2.0
CITY
Structural Transformation in South India
AGENDA FOR FUTURE
TRACING THE GROWTH TRAJECTORY
Comparison of Wage productivities
amongst Industrial workers
Growth will result from increasing productivity and capital infusion
Net Value add. per worker
100
94
78
64
37
IN
AP
KA
KE
TN
Andhra Pradesh
Auto
9.9%
Medical Instr
Electronics
3.4%
85
113
76
90
AP
KA
KE
TN
Fixed Capital per worker
100
95
IN
AP
KA
KE
57
Mining Quarrying
IN
Source
92
AP
84
KA
49
KE
70
TN
-1.5%
0.6%
5.8%
5.1%
-2.0%
1.2%
1.2%
-0.1%
7.6%
2.7%
1.5%
2.9%
-3.8%
2.2%
0.5%
Total factor productivity[across industries, mining and quarrying, electronics, chemical products has been declining. Real
value added per worker in the apparel sector in Karnataka has grown at a compounded rate of 3 %, while in Tamil Nadu the
value added per worker in the textile sector has decreased marginally over the last decade.
TN
Value add. to wage ratio
100
10.5%
-0.9%
18.8%
Textile
29
-2.7%
8.4%
-0.1%
0.1%
Apparel
110
23.3%
8.2%
1.0%
Paper
Wood
9.2%
-2.7%
Petro Prod
IN
-5.5%
-22.3%
12.2%
Plastics
Chem Prod
14.2%
16.0%
3.8%
Basic Metal
100
Tamil Nadu
14.3%
17.9%
Machines and Eqp.
Wage per worker
Kerala
Karnataka
IN India
AP Andhra Pradesh
KA Karnataka
KE Kerala
TN Tamil Nadu
The major factor for low productivity has been low economies of scale across industrial sector. The structure of incentives
restricts small scale industries to graduate to medium scale and then to large scale industries.
Similarly within a geographic region industries are extremely dispersed. Regions produce multiple products rather than
developing comparative advantage in a select few. The lack of specialization of workforce by trade and within region lowers
the output significantly
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10. On point  2.0
CITY
Structural Transformation in South India
AGENDA FOR FUTURE
Kerala
Publishing
Karnataka
High
High
COMPARATIVE ADVANTAGE
Current Comparative
Advantage
Plastics
Electronics
Petroleum Prd
Mining
Low
Ratio of Profitability
Tamil Nadu
Wood Products
Machine
Plastics
Basic Metal
Low
High
Petrochemicals
Low
Leather
Computer
Peripherals
Textile
Ratio of Profitability
Future Prospects
High
Instead of policy promoting
multiple sectors state
governments have to focus on
areas where they have a
comparative advantage, and
transform from a regional hub to
global scale expertise.
Andhra Pradesh
Paper
High
Low
High
Ratio in Output
Ratio in Output
Wood
Industrialization will be key for
growth in the future. However
the weghtage in different states
for different sectors do not
reflect their relative comparative
advantage
Textile
Agro based
Fabrication
Paper
Wood
Non Metal
Ratio in Output
Ratio in Output
Auto
Machines
Agriculture
Low
Low
Metal
Chemical
Low
Ratio of Profitability
High
Aparel
Plastics
Low
Ratio of Profitability
Electronics
High
Vertical Axis : Ratio of proportion output of Industry within a state to that proportion cross the country. Horizontal Axis: Ratio of the profitability of an Industry within a state to that across the
country
Source Computed using data from annual survey of industries
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11. On point  2.0
CITY
Structural Transformation in South India
On point 
This a summary of the key findings drawn from our reports. The
report explores the different forces of change in South India and
their implication on the future of the region
You can access the complete report available publicly from this
link or send a mail to shuvashish.chatterjee@clytics.com
.
Source
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12. Structural Transformation in South India
On point  2.0
CITY
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