India’s Elderly Population: Fiscal Challenges Offer Opportunities

Context: With the demographic transition, the rise in the elderly population poses a challenges. We can assure them income security and lower our pension costs by adopting a plan to keep the dependency ratio in control.

Increase in the proportion of elderly population

• Declining fertility levels: Countries around the world going through phase of falling fertility rates and rising life expectancy.
  • By United Nations’ population projections, the headcount of people aged 65 and above, which constituted 703 million people in 2019, will double to 1.5 billion in 2050, thus accounting for 16% of the world population.
• Developing countries like India are experiencing ageing at a faster pace: 
  • According to the World Health Organization, India’s elderly population will rise from its current 60 million to over 227 million by 2050.
  • Accordingly, the old-age dependency ratio will rise from 9.8 to 20.3.

Policy challenges associated with rise in proportion of elderly population

• Ensuring income security for the elderly: Insights from the Quality of Life for Elderly Index, released by the Economic Advisory Council to the Prime Minister (EAC-PM)
  • Income security is the biggest challenge: This particular pillar has the lowest national average score, at 33.03 (out of 100), with 62% of all regions scoring below the national average.
  • 21 of 36 states were found to have utilized less than 50% of their funds sanctioned under the National Programme for Health Care of the Elderly, while Chandigarh and Dadra and Nagar Haveli were not sanctioned any amount.
• Fiscal costs: India spends only 1% of its gross domestic product on pensions.

Way forward

• A change from ‘burden’ to ‘asset’: The negative connotation attached to old age should go. Institutional and policy framework should be conducive to this intended change.
• Promote active ageing: Pool of healthy elderly people capable of extended working demands higher investment in well-being of our working population today.
• Raise the retirement age in a phased manner: Ushering a truly multi-generational workforce, wherein older workers bring wisdom and work experience to complement the new-age skills and energy of younger lot.