33 Years Before India Turns 'Old'

'India is aging faster than many realise.'

India has just 33 years until it turns as 'old' as advanced economies by the 2050s as it is projected to reach the same support ratio as seen in advanced economies, finds the latest report by McKinsey & Company.

Support ratio is the number of working-age individuals per 65 year old or more people.

'India still has some time to benefit from its demographic dividend for economic growth but is aging faster than many realise. Despite very fast progress, India is still a low-income country, so it needs to 'get rich before it gets old'. Its GDP per capita is just 18 per cent of the World Bank's high-income threshold today,' the report titled Dependency and depopulation? Confronting the consequences of a new demographic reality noted.

The report further noted that the first consequence of India's demographic shift will be slower economic growth as from 1997 to 2023, India's beneficial demographics added 0.7 percentage points per year to GDP per capita growth.

However, through 2050, that advantage will shrink to just 0.2 percentage points per year.

'The second consequence will be pressure on public finances and families to support older people. Today India has 10 working-age people (15 to 64 years old) for each senior aged 65 or older, down from 14 in 1997; by 2050, there will be just 4.6 workers per senior under current projections, and by 2100, 1.9 -- about the same as Japan today,' the report notes.

Besides, it also said that India needs to increase the relatively low participation of its citizens in labour markets and sustain fast productivity growth.

The report noted that female labour force participation in India among those aged 20 to 49 is comparatively low (29 per cent in India versus 50 to 70 per cent in many emerging economies, and 74 per cent on average in high-income countries), which presents a large opportunity.

'Worker productivity, despite fast growth over the last decades, is still $9 per hour versus $60 on average in high-income countries, so the country has a lot of catch-up margin via innovation, investment, and technological adoption,' the report said.

In terms of India integrating with the world, the report noted that it can benefit from being increasingly important for the world.

While today it represents 9 per cent of global consumption, this is expected to rise to 16 per cent in 2050.

Meanwhile, shares in advanced economies are expected to be flat or declining.

'Within India, labour and consumption patterns will change too. The percentage of hours worked by seniors and older will rise from 2.9 per cent to 5.4 per cent if age-specific participation remains flat, or by more if seniors increase their participation,' the report noted.

'Consumption by those 65 and older will jump from 8 per cent to 15 per cent.'

Feature Presentation: Aslam Hunani/Rediff.com