What population trends mean for investors

World Population Day falls on 11th July 2025. It was created by the United Nations with the aim of raising awareness about world population issues. Population growth should be a consideration for investors as well. While it’s not always true that demographics are destiny, they can be hugely influential on a country’s economic momentum – or a drag on growth.

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Countries with strong demographics have a natural economic tailwind, with more young people earning and paying taxes. At the other end are most developed markets, where a smaller and smaller cohort of workers is struggling to support a growing population of the elderly and infirm.

The two extremes of this demographic spectrum are Japan and India. In 2024, government data showed the number of those aged 65 and over in Japan had risen to an all-time high of over 36 million – 29.3% of the population. Based on recent trends, it is expected that this elderly cohort will continue to rise, hitting 34.8% by 2040*.

This is being felt in the workforce – with over half of Japanese companies reporting shortages; in the country’s debt levels – now over 230% of GDP and rising**; and in its consumption habits. It has contributed to long-run deflation in the country and slower growth.

It doesn’t mean that investors can’t make money in Japan. However, it does require a different approach. With the right stockpicking, it is possible to stay on the right side of an ageing population. For example, Matthew Brett, manager on the Baillie Gifford Japanese fund, says: “Japan is the poster child for a society that actually cares about its elderly. Instead of saying ‘They’re old, let’s move on’, it’s investing very hard in these areas.”

This creates opportunities. His view is that Japan’s challenges have spurred innovation, placing Japan at the cutting edge of healthcare and medical technology***. He gives the example of companies such as Eisai, which has created anti-Alzheimer’s medicine Leqembi, or PeptiDream, which is at the forefront of peptide drug discovery (which can precision-target cancer cells), or Sawai Pharmaceutical, which makes lower-cost ‘generics’ – drugs that replicate branded medicines. This helps the government keep healthcare costs under control.

India is at the other end of the spectrum, enjoying a spectacular demographic dividend that is fuelling economic growth. With 65% of its population in the 15-59 years age group, and a median age of 28 years, this dividend could last for another thirty years****. A recent report by Ipsos said: “A larger workforce can lead to increased savings, investments, and consumption, fuelling economic progress. A smaller dependency ratio and increased disposable income will drive higher consumption across various categories.”

This is already being seen in some astonishing economic growth rates in India. The IMF says the country is likely to sustain annual GDP growth above 6% in 2025 and 2026^. This economic strength has come partly from the reform agenda of Prime Minister Narendra Modi, who has transformed banking, manufacturing, inflation management while also boosting physical and digital infrastructure, but he has had a demographic tailwind that has made his job a whole lot easier.

Ajay Tyagi, manager of the UTI India Dynamic fund, says: “While the market’s trajectory in the near term may be influenced by global developments and corporate earnings over the next couple of quarters, the medium-to-long-term growth narrative for India remains intact. India is well positioned to increase its participation in global trade, which shall be an additional long-term growth driver for the economy along with the domestic demographic dividend.”

Again, investors have to pick carefully to find companies that are in a good position to benefit from this dynamic dividend. It should help a range of different companies – financials may benefit from growing financial inclusion, for example, while healthcare spending is also likely to increase. UTI has an investment in Eternal, which owns Zomato, one of India’s leading online food delivery platforms^^. It points out that the addressable market for food delivery is vast, and growing quickly. Good demographics help supercharge that growth.

Demographics aren't necessarily destiny, but understanding a country’s population profile can highlight challenges and opportunities for fund managers. Fund managers need to work with the tide rather than against it.

*Source: Visual Capitalist, 30 January 2025
**Source: Statista, Countries with the highest public debt 2024, 28 May 2025
***Source: Baillie Gifford, March 2025
****Source: Ipsos, 20 June 2025
^Source: IMF World Outlook, 2025
^^Source: fund commentary, May 2025

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.