Need economic policy to cope with ageing population

Subir Roy

Senior Economic Analyst

THE Indian Republic is no longer young. It is turning 73. It is also on the way to becoming the most populous country in the world, leaving China behind. What is more, the fertility rate (the number of children that a woman is likely to bear during her reproductive years) has fallen below the replacement level of 2.2. This means the country will cease to reap the demographic dividend — a large number of youngsters will not be there to join the workforce to take care of an increasingly ageing population that has stopped earning.

At this juncture, the country needs to execute a dramatic shift in the economic policy so that the youngsters joining the workforce henceforth can be more productive, contributing more to the economy than was the case earlier. This requires a shift in political perceptions, social policy and public spending.

Foremost, the policy must seek to bring down the maternal and infant mortality rates, improve nutrition levels and expand training. This will allow healthy mothers to go back to work after giving birth and their babies to grow up to become healthy youngsters and robust workers. The youngsters must be properly educated so that after completing schooling they are able to access vocational training and acquire skills which enable them to work with increasingly sophisticated technology. Instead of running lathe machines, they would need to operate digitally driven workstations.

On farms, they will have to grow crops using less water and deliver the right level and mix of plant nutrients instead of simply dumping chemical fertilisers. And post-harvest, they must know how to market the produce at best prices by accessing farm information portals and joining farmer producer organisations, which sell at the best price available, instead of simply dumping the crop at the nearest mandi or the first middleman who arrives at the village after harvest with cash. They should take loans from a microfinance organisation or bank-linked self-help groups, instead of falling prey to local moneylenders.

This in itself is a tall order, but it is not enough. Right now, there is a mini crisis at hand. Gains in learning skills from schooling have received a setback as a result of school closure during the pandemic and inadequacies of learning from home via the digital network. Now that schools have reopened, there needs to be an emergency national plan so that children can have the same level of reading, writing and comprehension skills that they would have had if the pandemic had not struck.

Lastly, the system must develop the infrastructure for retraining workers so that they can handle newer machines. In Scandinavian countries, workers are paid to go on study leave so that with reskilling they are able to operate the newest machines which have just been installed at factories. This will raise the productivity level of a worker and take care of the impact of fewer workers as a result of fewer babies being born.

A comprehensive agenda for action to address all these issues has been formulated by the global civil society organisation, Oxfam. Its first point is to raise the tax burden on the rich and lower it on the poor. It can be done by imposing a wealth tax on the wealthy and reducing the tax burden on the poor by lowering the GST rates on essential items which the poor have to consume in order to keep hunger and destitution at bay.

With the fiscal resources so gained, the prime policy objective would be to improve access to public services like health and education. Foremost, the budgetary allocation to the health sector has to be increased to the target of 2.5 per cent of GDP by 2025, as envisaged in the National Health Policy. This will lead to the poor needing to spend less out of pocket for emergency medical treatment as public healthcare delivery will improve as a result of higher budgetary allocation.

This will happen when more and better primary and community health centres and medical colleges, along with district hospitals, are established. The latter will raise the supply of paramedics and doctors to man the extended healthcare system.

Simultaneously, says Oxfam, the budgetary allocation for education must be raised to 6 per cent of the GDP, as outlined in the National Education Policy. The increased resource allocation and provisioning of educational capacity must have a specific focus: concentrate more on areas which have a large number of members from deprived communities like the Scheduled Castes and Tribes and girls across the board.

As the poor get better healthcare and education, their households must be brought under a wider social security network. This is essential as 90 per cent of India’s labour force is engaged in the informal sector where a day’s absence from work or inability to find work means loss of a day’s income without a fallback.

The circle of entitlement will not be completed if a labourer has to think twice before taking an ill family member to a well-provided public health centre because it will mean staying away from work for a day and, thereby, losing a day’s wages. Besides, just as there is a system of anganwadis to take care of preschool children, there has to be an elaborate pension provision for all so that those too old to earn do not become a severe burden on their families.

In order for all this to happen, the citizenry must know what to seek from their leaders, both politicians aspiring for office and officials manning the administration. For this, the citizenry needs to be made wise on what is its due and ask for it in a coherent manner. This job of helping the citizenry to correctly articulate its demand and insist on adequate delivery has to be done initially by civil society organisations.

Over time, politicians aspiring for power, from the panchayat level onwards, must know what they have to promise and deliver to the electorate for them to not just acquire power but retain it. As the message travels up the political ladder, political parties at the apex will have to formulate the right platforms to acquire power and deliver on the promises to remain in power.

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