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Your retirement age could increase in the coming years. Here’s why

‘Considering that the life expectancy in India is likely to continue rising, increasing the retirement age could be considered in line with the experience of other countries’
New Delhi: As India moves towards the peak of its demographic dividend, the Economic Survey 2018-19 has said that a rise in the retirement age for most of India’s working population from 60 years at present seems inevitable due to increase in life expectancy. India’s population is expected to grow under 0.5% during 2031-41 due to decline in fertility rate and increase in life expectancy, the survey said. “Since an increase in the retirement age is perhaps inevitable, it may be worthwhile signalling this change well in advance — perhaps a decade before the anticipated shift — so that the workforce can be prepared for it,” the Economic Survey, which was tabled in the Parliament by Finance Minister Nirmala Sitharaman on Thursday, said. The survey said that a heads-up in the matter could help plan in advance pensions and other retirement provisions.

Why is the retirement age expected to rise?

Considering that the life expectancy for both males and females in India is likely to continue rising, increasing the retirement age for both men and women going forward could be considered in line with the experience of other countries, the survey said. In many countries that have a large ageing population, nations have balanced off the increasing pressure on pension funding by raising the pensionable retirement age. Demographic projections show that India’s population growth will continue to decline over the next two decades, growing less than 1 per cent during 2021-31 and under 0.5 per cent during 2031-41, the survey said.

Fertility rate to go down

“Such population growth rates would be close to the trend currently seen in countries such as Germany and France. In fact, with total fertility rates (TFR) projected to fall well below replacement level fertility by 2021, positive population growth in the next two decades will be due to population momentum and the continued rise in life expectancy,” it added. The survey pointed out that with the TFR going down and life expectancy continuing to increase, India’s population at the national level and in several states will begin ageing significantly in just a decade from now.

Some states to start transitioning by 2030s

“Although the country as a whole will enjoy the ‘demographic dividend’ phase, some states will start transitioning to an ageing society by the 2030s. A surprising fact is that population in the 0-19 age bracket has already peaked due to sharp declines in total fertility rate (TFR) across the country,” it added. According to the survey, working-age population will grow by roughly 9.7 million per year during 2021-31 and 4.2 million per year in 2031-41.

Share of young population set to decline

While noting that the share of India’s young population, in the age group of 0-19 years, is already starting to decline, the survey said that it is expected to drop further from 41 percent in 2011 to 25 per cent by 2041. Simultaneously, the share of the elderly, 60 years and above, population will continue to rise steadily, nearly doubling from 8.6 percent in 2011 to 16 percent by 2041.

What is demographic dividend?

Demographic dividend, as defined by the United Nations Population Fund (UNFPA) means, “the economic growth potential that can result from shifts in a population’s age structure, mainly when the share of the working-age population (15 to 64) is larger than the non-working-age share of the population (14 and younger, and 65 and older).” In other words, it is “a boost in economic productivity that occurs when there are growing numbers of people in the workforce relative to the number of dependents.” UNFPA stated that, “A country with both increasing numbers of young people and declining fertility has the potential to reap a demographic dividend.”