Mind the time : On the financial burden of India’s ageing population.
India needs public-funded geriatric care to take care of its elderly.
While India is often celebrated for its demographic dividend, its States are undergoing a significant but uneven demographic transition. According to a new RBI report, Kerala and Tamil Nadu will be “ageing States” by 2036 because their elderly populations will exceed 22% and 20%, respectively. On the other hand, the working age populations of Bihar, Uttar Pradesh, and Jharkhand will continue to rise beyond 2031. Karnataka and Maharashtra occupy the middle ground, balancing growth with the onset of ageing pressure. In response, the RBI has advised ageing States to “ rationalise ” their subsidies to afford rising pension costs and youthful States to “invest heavily in human capital ”. But how mindful is the RBI’s fiscal advice of the political undertones? Southern States, having successfully tamed population growth, face a double whammy: lower Central tax devolution because population weightage in Finance Commission formulae favours the populous northern States plus lower parliamentary representation due to the upcoming delimitation exercise. On the other hand, while the youthful States have a “ window of opportunity ” to boost growth using a larger workforce, the share of their spending on education has stagnated or declined, and the question of employability persists. These people will also enter the workforce at a time of manufacturing automation and AI in industry, so the RBI’s suggestion to “boost labour-intensive sectors” may leave these States vulnerable to the possibility of ageing before they get rich.
Research has shown that ageing in India disproportionately affects women, who often live longer but with fewer financial assets. The RBI’s focus on “workforce policy” overlooks the majority of elderly women who were never in the formal workforce and thus have no pension. The RBI model also assumes some level of family support, but with migration and nuclear families becoming the norm, the informal safety net is collapsing. Ultimately, the demographic transition cannot be managed by fiscal changes alone. First, a new industrial policy is needed to create jobs en masse in new sectors such as green energy and the care economy. Second, the youthful States must build healthcare and pension services now to avoid fiscal shocks if and when the replacement fertility rate drops. Third, for most of India’s elderly, the future looks less like “graceful ageing” and more like financial dependency, unless the state drastically expands social pensions; but this directly contradicts the RBI’s call for fiscal consolidation. Finally, without a massive expansion of public geriatric care, the “graceful ageing” that the report envisions will be available only to the wealthy.