Grow faster, before we grow too old

For a country long used to blaming its swelling population for all its woes, the irony is rich: life has come full circle. According to State of World Population 2025 report, India’s fertility rate has dropped to 1.9 – below the replacement level of 2.1. This development raises the intergenerational burden of economic growth. The workforce will have to cater to income and health costs of its rising retired population. This must be accomplished at a low level of income and employment. Ideally, the demographic transition should have occurred after a few decades of high growth. But it’s happening at a point when manufacturing has not acquired the capacity to absorb surplus farm labour.

Without a radical departure in its growth trajectory, India will have to fashion a more equitable course. Income redistribution will need to be put on a structured welfare footing. Policy orientation must swivel from those capable, but unable to find gainful employment, to also include those who cannot work due to age. Taxation and welfare spending need to acquire enhanced efficiency. Market mechanisms should be deployed on a broader scale to enhance retirement entitlements. Principally, though, focus must be on improving economic productivity to incorporate larger intergenerational transfers that will be called for as India’s population peaks in a few decades.

Development history suggests economies have drawn in external wealth before their demographics turned adverse. India must champion globalisation and create a place for itself in a globalised economic order. This may have become challenging as more countries address their demographic deficiencies through trade and strategic relations. But tech is a potential force for liberalism that Indian policy should aim to use to its advantage. Tech transfer is an accompanying factor for economies that have posted sustained surges in growth when their working-age population peaked. India must embrace the structural transformation to provide its workforce with better options while they still have age on their side.

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