By 2050, one in six persons in the world is expected to be over the age of 65. From 771 million persons aged 65 years or above in 2022, the global number is expected to double to 1.6 billion in 2050. Today, older people account for over one-fifth of the population in 17 countries.
These findings in the United Nations (UN) World Population Prospect 2022 and World Population Ageing 2019 reports indicate a global demographic shift that will unfold over the next few years. With that, there is a special focus on the two most populous countries in the world—India and China—and their ability to deal with that shift economically and socially.
The rise of the older population has been reported all around the world due to a steep decline in mortality. The transition from a high birth and death rate to their falling numbers has been observed as a common feature in developed economies, but in developing countries like China, which was anticipated to have 240 million people aged 60 and above by 2020, and India, it will not be as smooth.
In India, which is about to snatch China’s crown as the world’s most populous country, the rise of the percentage of the elderly in the total population has made the country the world’s second largest older population with 140 million people aged 60 and above.
As the world gets older, it is also intently looking at how the population dynamics will play out between these Asian neighbours and impact their economies.
China’s Population Puzzle
Following the one-child policy deployed by the communist country in 1979 as an intervention to curb its burgeoning population, there was an unprecedented fall in the country’s fertility rate. The Chinese government allowed female infanticide to keep up the traditional preference for a male child in the Chinese society. Couples were given the choice to pick the gender for their only child, and sex-selective abortions were allowed. The ramification came in the form of a demographic problem with a deepened gender gap that, in the long run, will further accelerate the decline in the rate of fertility.
Along with the gender gap, the policy, which was in effect for decades and scrapped only in 2015, also gave birth to rapid ageing.
China had already started experiencing population ageing in 2000. In 2022, the country came to be known as an aged society and has reported the fastest transition from ageing to aged. In comparison, many developed economies—like Japan (26 years), the United States (69 years) and France (115 years)—have taken much longer to reach the aged stage, as per the Asia Ageing report published by the U.S. Census Bureau in 2022.
These two demographic complexities have become critical areas with potential to destabilise China’s economic and social progress in the coming decades.
China’s Loss, India’s Gain
The immediate impact of China’s fast ageing is expected to add to India’s demographic dividend. Manish Sabharwal, vice chairman, TeamLease Services, explains that while China chose to grow old before it grew rich because an autocracy could brutally enforce the one-child policy, India’s democracy ensured that population control was more organic and depended on education, women’s empowerment, etc. Sabharwal’s views indicate that it could possibly become India’s moat going forward.
The demographic dividend is seen as the window of opportunity for the nation, as it is regarded as the source of higher economic growth and development, says Amit Kapoor, honorary chairman, Institute for Competitiveness. “Historically, in developed nations, the demographic dividend has contributed up to 15% of the overall growth rates. The economic benefits associated with this golden period are immense,” he adds.
This transition, however, is not going to be as smooth as projected, as it would take years to build a robust business ecosystem and supply chain networks among other things. Also, demographic dividend is not only about numbers but has to be also seen in terms of the quality of life, says S. Irudaya Rajan, chairman, International Institute of Migration and Development. “We have to create jobs. If we cannot create jobs in India, we have to create opportunities for Indians to get jobs abroad. So many countries need a workforce. For that, we have to focus on education and skill building. We have to promote international migration,” he says.
But, the issue with this demographic dividend, in the form of a youthful workforce, is that it is going to be limited as a decadal phenomenon. In the long run, India, too, is going to face the problem of ageing in terms of increased economic, social and environmental insecurity.
“Being a ‘young’ country that is expected to add about 100 million people to the working population in this decade alone, India is sitting on the brink of an opportunity that could transform the country’s development landscape. However, it is also true that this dividend is expected to fall in the decades to come meaning that India needs to utilise this opportunity now,” says Kapoor, adding that a loss in India’s demographic advantages will also lead to a fall in the country’s economic productivity. “We need to direct our energies and resources toward progressive policies that empower the young and working population of the country, like our east Asian neighbours, to avoid losing the demographic advantages,” Kapoor says.
Sonalde Desai, centre director, National Data Innovation Centre of the National Council of Applied Economic Research, says that as fertility declines, women will have greater freedom to contribute to the economy. “However, our economy remains stubbornly closed to women in a large number of professions. Without expanding opportunities for women at work and making public spaces safer for women, we will fail to reap full advantage of the demographic dividend,” she says.
India’s Demographic Imbalance
In India, the elderly population has been going up steadily since 1961. The growth picked up pace primarily due to a decrease in the death rate following various health interventions after the census of 1981, says the National Statistical Office’s Elderly in India 2021 report.
More than 27 million elderly were added to the population between 2001 and 2011. There were nearly 138 million elderly persons in India in 2021—67 million males and 71 million females—said the report. The number is projected to touch 193.8 million by 2031.
A government report on the population projections for India and the states highlighted that in 2021, Kerala, at 16.5%, was projected to have the maximum proportion of older people in its population, followed by Tamil Nadu (13.6%), Himachal Pradesh (13.1%), Punjab (12.6%) and Andhra Pradesh (12.4%). Bihar at 7.7%, Uttar Pradesh at 8.1% and Assam at 8.2% reported the lowest portion of the older population.
The projections for 2031 indicate that the highest rise of older people in its total population is going to be reported in the states of Kerala, Tamil Nadu, Himachal Pradesh, Andhra Pradesh and Punjab at 20.9%, 18.2%, 17.1%, 16.4% and 16.2%, respectively. The significant gap among the states is going to create a variation within the country in areas of demographic advantage and disadvantage.
The migration of the workforce is another critical area of concern. This translates to a shortage of labour supply and an imbalanced labour market, as the ratio of elderly people to those in the working-age group will continue to increase.
Desai explains how the country’s business ecosystem is built around a structured life course where individuals finish college at 21, work for the rest of their lives and retire at 60. “We need to develop a different mindset if we want to capture the opportunities that the demographic transformation offers us, like on the issues of age limits to enter into various jobs and mandatory retirement. As population health improves, population ages, skill and experience premium grow. We need to consider retaining our older workers in the workforce. We also need more flexibility at the entry stage, particularly if we want to encourage women to return to the workforce once their children enter school,” she says.
Unlike a developed country like Japan, where the sale of adult diapers has crossed the sale of baby diapers, India is very far from the frontier of this problem, says Sabharwal. “Instead of worrying about our ageing, let us worry about our youth at this stage since we have a favourable pyramid with a broad base...There is a clear economic cost to ageing, but let Western countries show the way on the options to deal with it,” he adds.
Dealing with an Ageing India
To effectively take care of the impact of an ageing population on the economy, the dependency ratio, or the number of people not in the workforce to the number of working members in the population, needs to be kept in check.
As per the UN, over a span of 30 years, China’s old age (aged 65 and above) dependency ratio has seen a steep jump from 8.2% in 1991 to 19.01% in 2021. This means that for every 100 members in the working-age population (aged 15 to 64), there are now 19.01 pensioners. It also revealed that the median age for China has increased from 29.5 in 2001 to 37.9 in 2021, which means the average age of the population is increasing. The findings of the National Development Research Institute of the Peking University projected that if China did not increase the age of retirement by 2050, its “younger generation will have to spend 41% of their income on supporting the elderly”.
In India, as compared to China, the increase in the dependency ratio remained much slower and has gone up from 7.06% in 1991 to 10.08% 2021. However, in 2021, the fifth round of the National Family Health Survey revealed that, for the first time, India’s total fertility rate touched 2, which means that Indian mothers are giving birth to fewer children. At this rate, each couple might not be replaced by the next generation, which will increase the dependency ratio in the long run.
Just like China, India’s median age has increased from 21 in 2001 to 27.6 in 2021, said the UN. A 2014 book titled Population Ageing in India indicates that the growth rate for the older population (aged 60 and above) in India is three times higher than that of the general population.
In India, historically, the elderly have relied on support from their children, buttressed by their contributions through homes they acquired while working or the land they inherited, says Desai. India’s vaunted preference for sons makes this a more significant challenge, as declining fertility is bound to result in a growing proportion of families with no sons, she points out, adding that it is important to create social norms that make it acceptable and expect daughters and sons both to support their parents. “It also requires restructuring of inheritance systems to ensure that parents can dispose of their property in a way that takes care of their old age needs or a child who most cares for them. This will require restructuring of coparcenary laws,” she says.
As the population ages and people have fewer children, we will need to develop systems that both strengthen and supplement these informal support systems. This will require both societal and financial system changes, Desai says. “More formally, setting up a universal social security system now will allow it to become mature and fully funded in 50 years when it will be most needed,” she argues.
Echoing Desai’s views, Poonam Muttreja, executive director, Population Foundation of India, says that elderly well-being and financial security must take precedence and planning for them merits consideration.
This will require high spending on social responsibility, pension schemes and access to healthcare systems for the elderly. The already overstressed healthcare system and low access are going to be critical areas that require preparedness and policy interventions.
The healthcare system must be ready for the transition to geriatric care because of the social and financial issues that the rise in the elderly population entails, says Muttreja. “This necessitates addressing difficulties with geriatric care, non-communicable diseases and financial and social support for the aged. Institutional mechanisms for supporting the elderly become crucial in the setting of declining family sizes,” she adds.
In India, pension schemes cover a small section of the elderly population and the growing retirement burden is soon going to impact the employed population, just like it is doing in China. A centralised pension scheme and social security system, like the one Desai makes a case for, are likely to become contributing factors for India’s economic and social progress as the country ages and fertility rate goes down further.