India's birth rate has declined dramatically in the last two decades due in part to rising female literacy, a new study shows, but experts are warning against complacency in the country of 1.2 billion.

The Total Fertility Rate - the number of children the average woman will have in her lifetime based on current trends - fell to just 2.3 last year from 3.6 in 1991, according to official figures released on Monday.

Improvements in female literacy were having "a direct impact on fertility", said the report, called the Sample Registration Survey.

India, which is set to become the world's most populated country in the next decade, has been trying for decades to curb population growth.

"The new data shows India does not need to panic," said Poonam Muttreja, director of the Population Foundation of India, a non-profit advocacy and research group.

"Even the poorest and most marginalised women want no more than two children, thanks to the country's focus on family planning in recent years."

While the national government officially abandoned targets for family planning in 1996, local authorities still offer cash incentives to women who undergo sterilisation.

Rights groups say this amounts to coercion. The problem was highlighted last month when 13 women died after a government-run mass sterilisation program in the central state of Chhattisgarh.

"We have to give the women a basket of choices. Investing in informed family planning choices prevents maternal and child mortality," said Muttreja.

"Also, population stabilisation and demographic dividend can only happen when our youngsters are educated and trained for employment."

The demographic dividend refers to the advantage that India has over an ageing Western world, with nearly 50 per cent of its population under the age of 24.

"We must continue our focus on family planning, spacing methods and postponing the age of marriage. We cannot afford to give up," Muttreja said.