First cash payouts to families who delay having a child as India's population threatens to overtake China's

Thousands of couples in India who agreed to put off having babies for at least two years after their wedding will collect cash payments this month as health officials attempt to curb the country's rapidly growing population.

While neighbouring China shows the first signs of relaxing its strict policy of one child per couple in the face of an ageing population, India is searching for a way of restricting the size of families as the battle over scarce resources grows.

The country's population stands at 1.2 billion and is expected to reach 1.53 billion by 2050. But increasing pressure on resources means that there is barely enough water and food to go round.

A pilot project in the Satara district of Maharashtra has proved a success and other states, including Delhi and Assam, are now considering cash incentives.

Satara, funded by the National Rural Health Mission, is offering couples a reward of 5,000 rupees (£62) if they delay having a child for two years (70 rupees a day is a good wage in rural areas). If they wait another year, they receive a further 2,500 rupees.

The birthrate in the district rose from 16.5 births a thousand people in 2005 to 17 in 2007. The project initially attracted 977 couples, but that figure has risen to 2,366.

Satara has about 25,000 marriages a year and 80% result in the birth of a child within the first year. Only 155 couples on the programme left to have children.

The first cheques are to be issued on 15 August, with officials cautiously optimistic about a reversal in the birthrate, which is now down to 16.1 per thousand. Couples who take part are also eligible for family planning advice and free condoms.

In China, officials in Shanghai told couples last week that they could take advantage of exceptions to the one-child policy. The move was seen as a reaction to the city's ageing population and to years of population decline.

Indian health officials could be forgiven for feeling envious of Shanghai. More than 27 million children are born in India every year and half the population is below the age of 25. If the projections are correct, India will overtake China to become the world's most populous nation by 2050.

Vivek Baid, president of the Mission for Population Control, said India could no longer sustain large families, and that it should now aim for zero population growth. "We feel that two children is a necessity, but that a third is not required. It is better for families to control their family size," he said.

"People's economic situation is not improved by having more children. It places them under greater financial pressure and exposes them to malnutrition and disease and they do not have the money for education and clothes."

Indians have traditionally had large families, partly to counter the effects of high infant mortality. The preference for a male child has also led to large families as couples continue to try for a boy.

Falling infant mortality rates and better education meant many families were now prepared to subscribe to the two-child solution, Baid said. But India was never likely to adopt the Chinese model. "Family is a must among villagers. People would break the rule," he said.

India's health minister, Ghulam Nabi Azad, raised eyebrows last month when he suggested that the best way to curb population growth was to provide electricity to rural areas. Couples would spend more time watching television and less time making babies, he suggested.

Although his suggestion was regarded as frivolous in some quarters, Azad was making a serious point. With the country's population increasing by 18 million a year, he urged couples to wait until they were 30 before they married and started a family.

"It's a great concern. We need to work at supersonic speed to curb population growth," he said.

Other politicians have taken a harder line. The health secretary of Karnataka state – population, 64 million – used the recent World Population Day to call for couples who had more than two children to be jailed.

India's approach to population control has been anything but consistent. Jawaharlal Nehru, the country's first prime minister after independence, considered a large population to be an asset for a poor country. That did not stop India introducing its first family planning programme in 1952, promoting the use of contraceptives, although it was not a great success.

By the 1970s, under Indira Gandhi, India was pursuing an aggressive policy of forced sterilisation for men with two children or more. That was abandoned when Gandhi was forced out and a more moderate policy of "Hum do, hamare do" (one family, two children) was adopted.