THE AGING ELEPHANT: INDIA’S LOOMING ELDERLY POPULATION
By Niyati Sinojiya
Debates about whether the massive population of India is a boon or bane has taken center stage in discussions on the country’s future and development. While conversations around India largely revolve around its poverty and its massive population, the question about what will happen in the years to come (which I’m pretty optimistic about) doesn’t bother me as much as the question of what will happen in the years after the “years to come”. What will happen after India sees its economic glory? What will happen when the millions of young people of today become the old of tomorrow?
As we can clearly see,India’s population is aging which leads to a decline in the working population. Two major reasons apart from the increasing age of marriage, (particularly in women) and decreasing infant mortality rate among infants, are the increasing life expectancy and the decreasing fertility rate.
Throughout my time as a school student, I once held the perspective that the reduction in infant mortality rate and the increase in life expectancy were positive trends,as they serve as important indicators of progress in healthcare. However, I later discovered that these improvements come with their own set of challenges and complications.
To give a clearer picture, here are graphs depicting the life expectancy and fertility rate of India.
But how does the aging of its population affect any economy?
Firstly, there is a direct impact on the labor force of any country. Older the people, lesser the number of people in the workforce doing productive work. This leads to a decline in economic growth and productivity. Japan is already facing a labor shortage and by 2040 it could be short of 11 million workers. According to the IMF’s world macroeconomic model ,the impact of Japan’s skewed demographics is projected to have a real GDP fall of about 20% in the next century and decreased annual GDP growth one percentage point over the next three decades.
Secondly, because of decline in the workforce of the country, revenue earned by way of taxes also reduces. This is accompanied with an increased burden of the government on expenditure on healthcare and pensions. This in turn affects its expenditure on productive investments like infrastructure,education and innovation.
Thirdly, it disrupts the entire mechanism of financial institutions.
To explain how this happens,here’s an intuitive diagram depicting the same-
As the population ages ,there is a chain reaction that takes place. It motivates people in the pre-retirement phase to save more and invest less due to its volatile nature. This is followed by a decrease in interest rates. A decrease in interest rates is due to the fact that borrowers have access to more funds and lenders have to compete by offering lesser interest rates to attract borrowers. Another reason could be that the central banks may respond by lowering interest rates to stimulate economic activity. This makes the financial institutions invest in riskier assets to account for the decreased profitability due to the reduction in interest rates.
The most effective way to mitigate the problem is to increase the number of working people in the country. This means that there should be an addition to the number of people in the workplace. There are 3 ways by which this could be achieved . Firstly, including more women to the workforce. But due to societal pressures and family obligations, this could be a challenge or a slow process. One way this problem could be tackled is by making daycare affordable.This could encourage more women to join the workforce. Another way to achieve this could be to decrease barriers to immigration. While this may not sound very practical for India, a society like Japan could hugely benefit from it. Thirdly, by creating an “age free” society, people over 65 years of age, who are willing and able to work should be allowed to continue working. This measure would retain people in the workforce even when there is shortage of labour in the country.
Here’s the old age dependency ratio of Bihar, Uttar Pradesh, Tamil Nadu and Kerala in 2021.
One key but peculiar finding is that although southern India has a higher dependency ratio compared to other regions across the country, its per capita income still remains the highest in India at around $3000-$3500. This is contrary to the popular belief that a higher dependency ratio will lead to a decrease in GDP and hence a decrease in the per capita income of a region.. UP and Bihar have the youngest population in India , people who can add productively to the workforce, but still the per capita income of these states is very low at around $580-$600. This indicates that human capital should be used more efficiently. In this case, though the demographics show an ever increasing population of the elderly in Southern India, there is a direct impact of policies, education, trust among people, and better distribution of resources for the welfare of the people on the economic growth of the region.
The role that the government needs to play in order for the older generations to age happily and healthily is significant.
Kiran Karnik,Chairperson of HelpAge India wrote in his article,
“Considering the demographic trends, India should reimagine its entire health-care policy for the next few decades, with an elderly prioritized approach. As senior citizens require the most diverse array of health-care services, the creation of adequate services for them will benefit all other age-groups. Apart from legislating pro-elderly health care and insurance policies, India needs to aggressively take certain measures, while finding opportunities amidst this challenge.”
While this does seem like a distant dream given the inadequate healthcare services in India currently, the success of the government in providing Covid-19 vaccinations to senior citizens does provide a little glimmer of hope. Relying entirely on the government to finance our future needs isn’t an ideal approach. As young and fortunate individuals, there are steps we can take to alleviate this burden as we age. It is quite simple; Adopting a healthier lifestyle by eating well,staying active,and prioritizing savings and investments. These proactive measures can reduce the occurrence of serious health problems as we age,which,in turn,can relieve the government’s financial strain.This way resources can be directed more efficiently toward those who are genuinely vulnerable and in need.
Speaking of vulnerable, the most severely affected in old age are old women, particularly those belonging to lower castes. Like any other challenge that a woman faces in the society, a retired life may also be one.
One of the key demographic characteristics in India is that there are more older women compared to men (For every 1000 elderly males, there are 1078 elderly women). Apart from the health issues that old age brings with itself, being an old woman is yet another challenge.
Take a look at the graph below.
The percentage of widowed women is way more than men among the elderly. This leads to them living alone, in poverty with no income, fewer assets and completely dependent on the mercy of their family members. Most older women depend on pensions to sustain themselves, but given the New Pension Scheme (refer to the next section), what should an old woman belonging to the lower strata of society, who has never worked in her life, do to survive?
One of the most beneficial steps that the Government of India had taken was the introduction of the National Pension Scheme in 2004 which was a replacement of the Old Pension Scheme. The key difference between the two schemes was that in OPS, employees contributed no amount to the pension,the entire burden was taken upon by the government solely,whereas in NPS, employees contribute 10% of their salary including dearness allowance and the government contributes 14% which is then invested in the financial market across various funds.In the new scheme, though the government still contributes to pensions, it has been sufficiently reduced. There is also an added benefit. In the OPS, the pension that the pensioners received was in line with the rate of inflation(due to increase in pension with increase in dearness allowance), but in the NPS, the pensioners have an opportunity to beat the inflation and earn even higher than they would have earned in the OPS. It is sustainable and a win-win situation for both the government and the pensioners.
Though there is still a lot of time for our young country to age, this time should be used effectively to plan and structure the future of our country in a way that will promote happy aging without disrupting the economy. The pension system taken up by the government and the successful provision of vaccines to the elderly during Covid-19 does show us the competence of the government to help the elderly, but there is still a long way to go until all people,particularly elderly women from lower socio economic backgrounds ,live and age well. Valuable lessons from within the county, from the south should be acquired to benefit the other states too. The government and the younger generation need to work together to ensure the well-being of the elderly to prevent a fate similar to the one faced by Japan.
And as rightly said by Kiran Karnik,
“After all, the proof of a truly evolved and caring nation lies in the way it not only nurtures its young but also how it cares for its aging population.”
Japan’s ageing population: The implications for its economy | World Economic Forum (weforum.org)
Japan: Demographic Shift Opens Door to Reforms (imf.org)
Measures to Address Japan’s Aging Society | February 2021 | Highlighting Japan (gov-online.go.jp)
Economic impact of Japan’s aging population(https://insights.grcglobalgroup.com)