When Andhra Pradesh Chief Minister N Chandrababu Naidu recently proposed a cash incentive of Rs 25,000 for couples having a second or third child, it revived an important question about India’s demographic future: Can governments reverse falling birth rates through financial incentives? Andhra Pradesh today records a total fertility rate of roughly 1.4 children per woman, significantly below the replacement level of 2.1. Concerned about the long-term economic fallouts of an ageing population, the state is exploring ways to encourage larger families.
The idea of paying couples to have more children may appear bold. Yet India has already seen a similar experiment, one that has been underway for several years in Sikkim. If Andhra Pradesh is worrying about low fertility, Sikkim has been living with it for some time. It has the lowest fertility rate in India, about 1.1 children per woman, comparable to some of the lowest fertility societies in the world. Concerned about the implications of such a decline, including population ageing and a shrinking workforce, the Sikkim government decided to intervene.
Around 2022, the state rolled out a series of incentives designed to encourage couples to have more children. These amounted to perhaps the most comprehensive pro-natalist policy attempted by any Indian state. For government employees, the state introduced salary increments linked directly to childbirth. One additional increment was offered when a second child was born and two increments when a third child arrived. The idea was straightforward: If raising children became financially less burdensome, families might feel encouraged to expand.
But the policy went much further. Women government employees were offered state-funded childcare attendants to assist them after childbirth. This was intended to reduce the conflict many working women face between professional responsibilities and parenting. Maternity leave was extended to one year and paternity leave was also introduced, acknowledging that parenting is a shared responsibility.
The incentives were not limited to government employees. Mothers working in the private sector were also included. The state promised Rs 5,000 per month for one year after the birth of a second child and Rs 10,000 per month after the birth of a third child. Perhaps the most innovative aspect of Sikkim’s policy addressed a factor often ignored in demographic debates: Infertility. Interestingly, the state chose to tackle it directly.
Under the Vatsalya scheme, the government offered financial assistance for in vitro fertilisation (IVF) treatment to couples unable to conceive naturally. IVF can cost several lakhs of rupees, placing it beyond the reach of many families. The state stepped in to fund up to two IVF cycles for eligible couples. The response was immediate. In the initial phase alone, around 38 women enrolled for IVF treatment, suggesting that infertility was indeed one contributor to the state’s declining birth rate.
Together, these policies formed a comprehensive approach: Financial incentives, childcare support for working mothers, expanded parental leave and even government-backed fertility treatment. Despite these incentives, Sikkim’s fertility rate remains extremely low and the anticipated baby boom has not materialised. The state government has since partnered with national research institutions to understand why fertility continues to decline. Sikkim’s experience reflects a broader global pattern. Governments across the world have tried to encourage childbirth through financial incentives and social benefits. Yet the results have rarely matched expectations.
Take Singapore, TFR about 1.0. For decades, the city-state has offered generous baby bonuses, tax rebates, subsidised childcare and housing incentives for families with children. Despite these measures, its fertility rate has continued to decline and remains among the lowest in the world. Then there is South Korea, TFR about 0.7, which has invested enormous public resources in pro-natalist programmes. The government has offered cash grants, childcare subsidies, housing support and long parental leave. Yet fertility continues to fall, giving South Korea the lowest birth rate globally. Japan, TFR about 1.3, faces a similar challenge: Fertility has remained below replacement level.
Even China, TFR about 1.0, after abandoning its decades-long one-child policy, encouraged couples to have two children and later three, supported by incentives and policy changes. Yet, the expected rebound has not occurred and birth rates continue to decline. Among developed countries, only Hungary is cited as a partial success story.
Around 2011 Hungary’s fertility rate had fallen to about 1.23 children per woman. The government introduced an aggressive pro-family policy regime that included housing subsidies, subsidised loans that are written off after multiple births, and lifetime income tax exemptions for mothers with four or more children. Over the following decade, fertility rose to about 1.55. But even this remains well below the replacement level of 2.1. Some demographers believe part of the increase reflects couples having children earlier rather than having more children overall. The explanation is simple: Decisions about having children are rarely determined by financial incentives alone. The Hungarian model deserves a closer study.
Across modern societies, fertility decline is driven by deeper structural changes. Women marry later and pursue longer careers. Urban lifestyles raise the cost of housing, education and, increasingly, childcare. Many couples prefer to invest more resources in fewer children rather than raise larger families. In such circumstances, a one-time payment or monthly subsidy, even a generous one, may not significantly alter the fundamental calculus of family life.
This does not mean governments should do nothing. International experience suggests that fertility responds less to one-time incentives than to long-term confidence in family life. Countries that have managed to stabilise birth rates, such as France and the Nordic states, did so by making parenthood compatible with modern life through affordable childcare, predictable parental leave, flexible workplaces and housing support.
Seen in this context, Andhra Pradesh’s proposal should perhaps be viewed less as a definitive solution and more as a policy experiment. Sikkim’s experience offers a useful lesson. Demography moves slowly but powerfully. Governments may attempt to encourage childbirth through incentives and subsidies, but the decision to bring a child into the world ultimately reflects a family’s confidence in its economic future and social stability. That confidence cannot simply be purchased.
Quraishi is former Chief Election Commissioner of India and author of The Population Myth: Islam, Family Planning and Politics in India
