India may not be able to cash in on ‘demographic dividend’ of young workforce for long: Economists

MUMBAI: India, set to become the world’s most populous nation this year, may be unable to cash in on the “demographic dividend” of a young workforce for long, warned economists. 

Much emphasis has been placed on India’s large number of young people, which gives it an edge over other nations with an ageing population, but the country could face problems down the road with the current labour situation and existing policies.

Analysts expect India’s population – 65 per cent of which is under the age of 35 – to grey very rapidly over the next two decades.

FUTURE-PROOFING INDIA’S WORKFORCE

Noting that India is sitting on a ticking time bomb, economists said the country needs to act soon to better future-proof its workforce.

“Do Indians save enough for retirement? Probably not,” said Professor S Chandrasekhar of the Indira Gandhi Institute of Development Research. 

“Can the elderly afford the health care costs, because healthcare costs have really increased? Probably not. I think this is where we need to have a larger discussion, in terms of the cost of providing health care.”

A report by the Indian government's Economic Advisory Council showed that 8.6 per cent of India’s citizens are over the age of 60, a rate far lower than many developed countries. 

However, it projected that by 2050 the country’s elderly population will increase by three times to reach 319 million, making up nearly 20 per cent of the total population.

To cope with the ageing population, the council recommended measures such as raising the retirement age, increasing the income security coverage of existing pension schemes, subsidising health services, and reskilling the elderly workforce.

While the country does have several social security programmes, including voluntary pension systems and a government healthcare scheme, not everyone takes advantage of them – often because they have not been able to pay into a pension.

As such, the onus falls on the younger generation to help provide for the elderly in the family.

Wedding band vendor Gulab Kamble, 52, is taking care of his 80-year-old father after his mother passed away last year.

He said: “My son will take care of me. He has already started. He will take care of me, the way I do now for my father.”

FALLING OUTSIDE INDIA’S FORMAL ECONOMY

However, not everyone is so fortunate.

Mr Sikander Khan sells ice cream to cover his expenses every day, and the 63-year-old believes he may have to do this for the rest of his life.

He and his wife barely see their nine children after they moved away from home and had their own families, let alone receive any financial support from them. 

“We are alone and have to make our living. We have to go out and try to sell our ice creams,” said Mr Sikander, who has no pension and no health insurance. 

“We have to earn a couple of hundred rupees to make our living. Sometimes we make some money and sometimes we earn nothing.”

These days, the couple try to scrape together a few dollars daily to get by.

For most of his life, Mr Sikander was a casual labourer and earned daily wages, which was spent on his family. 

The Indian government has recently put the number of workers such as Mr Sikander who fall outside India’s formal economy at more than 400 million.

FERTILITY RATE NOT HIGH ENOUGH IN SOME STATES

The Population Foundation of India has warned that in some states, the fertility rate is not high enough for the population to replace itself.

The non-governmental organisation also cited the example of Kerala state, where there is higher social development, but a fertility rate that is lower than elsewhere in the country.

This could contribute in the long run to an ageing population, a problem other economies in the world are already facing. 

Analysts urge policymakers in India to take heed, even while the country reaps the demographic dividend of a young workforce.