Silver Dividend: How Can India Tap Into The Senior Workforce For Better Growth Potential?

India has an opportunity to get more productivity out of its senior population, a report by the Asian Development Bank (ADB) said. The ageing population in Asia and the Pacific could potentially reduce the demographic dividend of countries with younger populace like India and Indonesia over the coming years, the report named ‘Aging Well in Asia: Asian Development Policy Report 2024’ noted. The report also noted that the share of people aged 60 or above will marginally increase in the Asia Pacific region by 2025 as compared to levels recorded in 2022. This is called the 'age of dependency ratio', a demographic and socio-economic statistic used to measure the ratio of dependents to the working-age population.

The report released earlier this month highlighted that the share of people aged 60 and above over those in the 15-59 age bracket, called the old-age dependency ratio, will significantly increase in the Asia Pacific region by 2050 from the levels recorded in 2022.

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In 2022, India overtook China as the country with the largest population in the world, with more than 1.43 billion people. ‘The old-age dependency ratio was slightly less than 20 per cent in 2022, it is expected to move over 30 per cent by 2050,’ the report found using an analysis of UN data.

For India, the old-age dependency ratio, which was a little less than 20 per cent in 2022, is expected to be over 30 per cent by 2050, the report said, using an analysis of United Nations data.

The Silver Dividend

The report incurred that younger economies such as India and Indonesia will continue to enjoy sizable demographic dividends, although dwindling ones. The change in the old-age dependency ratio will reduce India’s GDP growth per capita by 0.053 percentage points in the 2031-2040 period, the report suggests.

‘Demographic tailwinds that helped propel developing Asia’s past economic growth will turn into demographic headwinds in the coming decades,’ the ADB report reaffirmed the conventional approach. However, it also noted that nations can significantly increase the working capacity of old age groups by promoting their well-being, especially in health care.

‘Economic growth rate of countries could benefit if the untapped work capacity of people in the age group of 60-69 years is tapped, said Aiko Kikkawa, a senior economist at ADB at the briefing of the report. ‘India could see an improvement of 1.5 per cent in GDP growth rate in terms of ‘silver dividend’ if the untapped work capacity is utilised, he further noted

The Age Factor:

An ageing population would mean a lesser workforce in the nation while spending on the welfare of the aged increases. This in turn impacts public debt as well as the debt servicing capacity of the country.

Take China and Japan as an example, ‘India could be the next Asian country to face the challenge of an ageing population as over the next 25-30 years, the current middle-aged working population would become the old-age population," stated NR Bhanumurthy, vice-chancellor at Dr BR Ambedkar School of Economics University.

The ADB report noted that the population falling under 60 years and above bracket in developing Asia and the Pacific is set to almost double by 2050 to 1.2 billion. This would further escalate the need for pension and welfare programmes as well as proper healthcare services.

Calling old age challenge a future fiscal policy risk, Bhanumurthy said that it should become a part and parcel of ‘India’s public policy discourse’.

Promoting the well-being of senior citizens

The expansion of health and long-term care services, enhancement of pension coverage and adequacy for old age people would entail substantial fiscal costs. To overcome this, the report enlists some measures such as:

• Public and private investment in human capital, beginning in the cradle with preventative and curative health care

• Promoting lifelong education to generate over time bigger silver dividends as healthy and educated older people become more productive

• Retirement savings can be a significant new source of capital for productive investment that generates more economic growth and tax revenue

‘Macroeconomists look at indicators like the dependence of young people and old people as a share of working-age people and if this dependency ratio is increasing, then it is going to be a headwind to growth,’ said Albert Park, chief economist at ADB. He further stated that India enjoys a demographic dividend in terms of its positive contribution to growth.

Park suggested giving more flexibility for old persons to transition from full-time work to part-time work to address the growth impact of the growing old-age dependency ratio.