Robust economic growth critical for India to take care of its elderly

A development in India’s ‘care economy’ for the elderly will depend on the wealth growth of the younger generation in the next two decades.

India is at the threshold of a demographic transition marked by a surging ageing population. According to the UNPF's India Ageing Report 2023, the elderly population is set to double from 10.5 per cent (14.9 crore) in 2022 to 20.8 per cent (34.7 crore) by 2050.

While it represents just 20 per cent of the population, the absolute number of elderly citizens surpasses that of many countries like the United States and Japan. This ageing population brings unique problems and opportunities, emphasising the need to learn from other elderly societies, and reflect on India's current demographic dividend phase. However, if the country fails to leverage its current demographic dividend, the transition to a demographic burden could be a disaster in the offing.

Ageing reflects a transition from high fertility and low education to low fertility and higher education in most societies. This shift results in a reduced workforce, potentially slowing economic growth. The dependency ratio, which compares dependents (0-14 years and over 65 years) to the working-age population (15-64 years), is expected to rise in society. According to the Longitudinal Ageing Study in India (LASI, Wave -1), there will be 38 dependents for every 100 working-age individuals in 2050. However, the impact varies by state due to differences in median age, longevity, and socio-economic conditions. 

Lower fertility rates have led to the rise of an ageing society, while simultaneously, population growth, coupled with improvements in healthcare systems for the elderly, continues to contribute to the formation of an elderly society. The challenge is to address the needs and requirements of the ageing society, and how to sustain economic growth and activities.

The trends in ageing societies show that aged countries first achieved a high per capita income prior to entering the ageing phase. Per capita income is a crucial indicator for understanding the wealth of each citizen and the State's capacity to manage public finances in an ageing society. Responses to ageing have varied from country to country. In some countries, the ageing population possesses sufficient wealth to support themselves, while in many others, the State has restructured social security schemes for the elderly by allocating more public funds. This demonstrates that wealth creation at both the individual and State levels is critical for the sustainability of an ageing society.

In India's case, this is an important lesson to consider given the size of its elderly population and the challenges related to public debt management. Although there have been several attempts to improve social security schemes in India, two major challenges stand out. First, is determining the pension or social security amount that can be allocated to the elderly, and its real-time value in terms of purchasing power parity (PPP). The second, is the development of supporting infrastructure and the required investments for the same. In both cases, if the overall wealth of the entire population does not rise significantly, the government may resort to borrowing from the market, potentially crowding out private investments, and, thus, resulting in a double whammy effect on the ageing society.

As the dependency ratio increases, the burden may shift to the working-age population. Without improvements in their income and living conditions, it could become challenging for both parties to maintain a decent standard of living. A concerning aspect is that India faces regional and social disparities in living conditions.

Many studies have projected that the most affected groups in India's elderly society in the 2050s will be SC/STs, minorities, and women, as they may lack sufficient income and access to basic necessities. Low labour force participation, especially among women, coupled with increased longevity, poses a challenge unless reforms promoting access to employment and job creation are undertaken, with benefits materialising over the next 25 years as the population ages.

The average Indian lifespan in the 1950s was 32 years, by 2020, it had risen to 70 years. Concurrently, the proportion of ‘oldest old’ individuals aged 80-plus has more than doubled, growing from 0.4 per cent in 1950 to 0.94 per cent in 2015. Projections indicate that by 2050, this segment is expected to surpass 3 per cent, encompassing nearly 48 million individuals.

Educating on preventive healthcare lifestyles and ensuring accessible healthcare facilities for the elderly is crucial for fostering a healthy older population. Promoting their active engagement in the workforce is equally vital in mitigating the demographic's influence on economic growth and shaping the future dynamics of dependency.

In this context, it also becomes indispensable to have comprehensive datasets that include information on age, gender, economic class, labour income, and skill sets, in understanding the ageing scenarios and formulating targeted plans to address them.

Worker migration is a significant challenge in India, largely stemming from the scarcity of attractive job opportunities. Indian healthcare professionals are increasingly being drawn to cater to the healthcare needs of ageing populations in developed countries. However, when it comes to addressing the challenges of our own ageing population, an entirely different set of complexities emerges. Local healthcare workers may not find the prospect of entering this field appealing without a lucrative career prospect. A robust ecosystem for elderly care services can only flourish and mature within an affluent society capable of offering competitive income and compensation packages for those dedicated to working in caregiving facilities.

As the population ages, tax revenue and saving patterns also undergo changes. Many countries observe increased savings among the elderly, leading to reduced consumption. India has experienced varying savings trends relative to GDP in recent decades. One of the challenges in this scenario could be the formalisation of occupational opportunities.

While experts opine there would be a development of a ‘care economy’ for the elderly, its emergence depends on the wealth growth of the younger generation in the next two decades. Nevertheless, efforts to combat elderly loneliness by providing opportunities for the current generation are essential. Long-term success in addressing the challenges of an ageing population hinges on consistent and robust economic growth prior to entering the era of ageing. 

(D Dhanuraj is Chairman, and Nissy Solomon is Senior Research Associate, Centre for Public Policy Research, Kochi.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.