Mukul G Asher & Deepa Vasudevan
India is currently experiencing a demographic phase characterised by declining fertility rates and higher life expectancy. As a result India’s population is ageing rapidly. The number of persons aged 60 and above will rise from 84.6 million in 2005 to 97.4 million in 2010, and to about 335 million in 2050. By 2050, nearly 20 percent of India’s population will comprise of people over the age of 60 years. Simultaneously, the pace of ageing is rising. The life expectancy of a person at 60 years is currently about 18.5 years for women and 17 years for men. This is expected to grow as India’s economy approaches US$ 2 trillion from the current US$ 1.1 trillion; per capita income approaches US$ 2000 from current US$ 1000; and living standards improve.
Even as the greying population increases, urban migration and changing social structures have reduced the old-age support traditionally provided by members of the extended family; while improved living standards have led to longer life spans. The United Nations projects that the share of urban population in India will increase from 30 percent in 2010 to more than 50 percent by 2045. This implies that urban population will be about 700 million by 2045. Thus, social safety nets in urban areas will require different design and competencies and will be more costly to provide.
The challenges of caring for a greying population are accentuated by the low coverage of current social security schemes. At present only about a fifth of the population is covered by at least one scheme; and a much smaller proportion of that segment is covered in a way that will provide relatively comfortable retirement.
In the medium term, there will be significant and growing numbers of elderly persons, largely without a formal employer-employee relationship, who will need financial resources in retirement for longer periods. Establishing a pension architecture which commands confidence of the population through its professionalism, transparency and accountable governance has therefore become an important priority for the country.