The country has the second largest population in the world, and the authorities have found it difficult to persuade families to have fewer children.
However, experts see little cause for cheer because of diminishing natural resources and increasing poverty, illiteracy and unemployment.
News that the one-billionth baby had been born was officially announced in Delhi at 1232 local time (0702 GMT).
In a ceremony at Delhi's Safdarjung Hospital, officials feted the billionth child - a baby girl named Astha (Faith), born to Anjana and Ashok Arora.
Moment of reflection
India's government is using the occasion to highlight the problems caused by the growing population and the need to control it.
The country has the second largest population in the world, and the authorities have found it difficult to persuade families to have fewer children.
As one senior civil servant put it, while the event is a matter of joy for the family, it also provides a moment of reflection for the government.
The United Nations has warned that if India's demographic growth doesn't slow down, there are likely to be shortages of food and water in the near future.
The spiraling population hampers every measure of progress India tries to achieve.
Food production has tripled since 1947, but many people are undernourished; literacy has increased, but so has the number of illiterate people.
The problem is particularly obvious in Bombay, where more than half of the 15 million people sleep in the streets or live in huts.
Demographic bomb
According to official figures, the population of Bihar grew 16.4% between 1991 and 2000, Uttar Pradesh recorded 23.3% growth, Madhya Pradesh's population rose by 21.4% while in Rajasthan, growth was around 22.4%.
India's health minister said the situation is "grim", but India can overcome it if it acts "responsibly". "If we delay, things can go beyond control," he said.
Since independence in 1947, the fertility rate has been cut from six births per woman of child bearing age to 3.5, while the birth rate has declined from 40 per 1,000 in the 1960s to 28 in 1995-96.
But at current growth rates, India's population will reach two billion in the later half of the next century.