India’s demographic dividend is the biggest pillar of its economic potential at the moment. According to UN population projections, India’s share of the working-age population (15-59 years) is believed to have already overtaken China’s and this lead is expected to increase to 1.5 and 2 times the number of working-age adults in China by 2048 and 2076. While these numbers underline demographic tailwinds to India’s future economic growth, this is not the entire picture on the demographic front. Here is why.
The India Ageing Report 2023, prepared by the United Nations Population Fund (UNFPA) in collaboration with the International Institute for Population Sciences (IIPS), says the share of people aged 60 years and above will increase significantly going forward. This number is believed to be around 10.5% at the moment and is expected to reach 20.8% by 2050 and 36% by the end of the century. The share of the 60-plus population will be greater than the share of children up to 14 years in 2046 itself.
Once the two sets of numbers are read together, the real relationship between our demography and economy becomes clear. Not only do we need to create a lot of jobs for our working-age population, but the Indian economy will also need to make enough provisions for its elderly. Given that most of our current workforce does not have any retirement benefits, this is an even more difficult challenge. What is to be done to ensure that this does not derail our economic and social fabric? Here are three things that need to be flagged.
First is the need to drastically overhaul our social security and support infrastructure. More than anything else, this will require a massive expansion of our health infrastructure. Given concerns of affordability, this job cannot be left to the private sector alone. What makes this challenge even more important is the fact that our disease burden will increase given the worsening climate crisis and rising pollution levels. The second is the challenge of ensuring that the cohort currently working has enough retirement funds. This is an extremely difficult thing to do for people who do not earn enough to support even their current consumption requirements. There is anecdotal evidence that a section of young workers prefers to use debt or potential savings to finance their current consumption requirements. While this will benefit the economy in the short to medium term, the question of what it entails for post-retirement corpus cannot be ignored. The third factor worth paying attention to and planning for is the demographic divergence within Indian states. Southern states are already much older than their northern counterparts and this divergence will increase manifold going forward. The former have been key drivers of India’s growth process and have already emerged as an attractive migration destination for young workers from the not-so-rich Eastern and Northern states. There’s been no political or social hostility to this thus far but as migrants continue to expand their footprint in these states, and with the delimitation question bound to come up in the next decade or so, it cannot be taken for granted.
For all of these issues to be addressed, our politics need to stop obsessing over population growth and begin a sincere engagement with the nuances of our changing demographics.
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