Thursday, May 12, 2011

The greying of India

"We are not limited by our old age; we are liberated by it."

Sounds nice........ but in a lot of cases it is too good to be true. One thing that particularly strikes me and on which I thought of blogging for quite some time is the greying of India. As one looks around, the one thing which strikes is the increase in the number of old people compared to say twenty years back.

Population ageing is an universal and irreversible phenomenon. Of course, it varies from country to country depending on mortality rates, fertility and migration trends. One of India's most stunning achievements post independence has been longevity. While other countries even developed nations have struggled to increase longevity. We have increased our longevity to quite a decent level. All this brings with it a lot of questions and issues. We need to provide health, economic and social security to this vast population of greying India within a short span of time. India's older population is projected to quadruple by mid-century, while that of the world is expected to triple.

Several years ago I was associated with a project which was working on old age pensions and this is a topic which has always been close to my heart. A generation of Indians especially govt employees have been assured of fixed pensions from their date of retirement. However, the government took a different view of assured / guaranteed amount of pensions after it understood that the load on the exchequer would be staggering considering India's rate of increasing ageing population. The OASIS committee which was formed to suggest pension reforms in India came out with a few eye opening facts:-

  1. India's total population is expected to rise by 49% between 1991 and 2016. The share of aged in the total population by 2016 would stand at 8.9% and at 13.9% at 2026.

  2. Males and females aged 60 are expected to live beyond 75 years which means that they would need to have means to support themselves for 15 years after retirement.

  3. Approximately 74% of India's population is rural which does not have a defined pension system as the population mainly consists of farming or contract labour. A total of 11% population in India is presently covered under a pension system and thus the threat of old population sinking into poverty after retirement/ out of work is very high.

  4. The unorganised and private sector have no real laid down pension system and the risks of their standards of living falling drastically on retirement is very large.

  5. Families are becoming smaller and the joint family system is considered unattractive thus leaving the old largely to fend for themselves economically and socially.

I am not going to blog on the details of the pension system but what I wanted to bring about is a change in thinking which is needed for all Indians. Indians are traditionally savers, an average 35% of the money goes into savings ....but how much into retirement savings? Most people's priority of savings are housing, children's marriage, higher education and health care or emergency costs. This leaves aside very little corpus to take care of retirement needs for the elderly couple.

The second larger issue is of a system nation wide which can address the unorganised sector, self-employed, partially employed and people who cannot contribute to a pension system regularly, yet need a security cover and a certain amount of money during their greying years. Current the little population largely government employees which the defined pension system covers is one of defined contribution, defined returns which actually means falling returns as the inflation keeps on increasing. Any pension reform has to bring the unorganised sector into the reform process.

The third issue is educating the people on the issue of retirement planning. Today a large percentage of people with large disposable incomes accord a very small percentages of their income on creating a retirement corpus. ( A holiday abroad, fancy cars, gadgets etc all take precedence). Education also means creating a realistic awareness of the level of returns expected from the retirement plans. Too much optimism from a retirement fund scheme can also be equally harmful. A large section of our working force still relies on premature withdrawal of possible retirement savings like provident fund to fund immediate financial needs.

The fourth issue is including the poorest of the poor- BPL families in the scheme of the things. Currently govt plans provide for certain days of guaranteed employment for families below poverty line but govt and NGO's needs to step in when they are unemployable. The poorest of the poor largely live on daily wages and it is impossible to think that they can create a retirement corpus on their own.Any reform or pension system should be targeted to include this large population with almost zero savings.

The next issue(fifth) is in a large section of employed population , there is a seeming problem that one may outlive the accumulated wealth which has been set aside for retirement years.In the absence of a pension system , a prudent saver may have saved in a disciplined manner . However with increasing inflation there is always the fear of outliving the accumulated wealth.

There is also an issue of a large section of women outliving the men which means that the man's contribution to household income may stop a long before and the woman has to fend a long number of years all by herself.This assumes a more complex dimension if the woman has not been employed ever.

Another complex issue which needs to be sorted is - How old is old? I raise this because the corpus of providing retirement benefits or social security to an increasing population is shrinking and one needs to take an unbiased view of the same. My personal opinion is that , although 60 and above is considered the old age, people in any sector who are employed and are able to earn their livelihood should receive less preference for benefits than people who are unemployed or with special needs.

I want to treat this blog as a living article which I will keep on updating as I personally get more enlightened on this subject. However, the topic of " Greying of India" cannot be complete without thinking of what one does during the greying years. These can turn out to be the most glorious years in a person's life provided one is able to pursue hobbies,read travel or blog, listen to music , enjoy good times with family and friends, volunteer for social work, give free coaching on a subject and basically stay active.