Mentor’s Comment

This article is important because India’s population change is no longer a future issue, it is already happening unevenly across States. It is in the news as it questions the RBI’s advice that ageing States should cut subsidies to manage rising pension and healthcare costs, while younger States should focus on education, skills, and labour-intensive growth. The article highlights a key gap: without public, State-funded geriatric care, demographic advantage may turn into a serious social and fiscal burden.

Why in the News

India faces its first clear inter-State demographic divergence where ageing and youth coexist simultaneously at scale. Kerala and Tamil Nadu will become “ageing States” by 2036, with elderly populations exceeding 22% and 20%, respectively. This marks a sharp shift from earlier decades when demographic transition was gradual and nationally uniform.

Why is India’s demographic transition uneven across States?

1. Demographic divergence: Southern States experience rapid ageing due to sustained fertility decline, while Bihar, Uttar Pradesh, and Jharkhand retain expanding working-age populations beyond 2031.
2. Middle-ground States: Karnataka and Maharashtra face simultaneous growth and ageing pressures, complicating fiscal planning.
3. Policy implication: Uniform demographic assumptions no longer apply to inter-State fiscal transfers or social sector planning.

How does the RBI propose managing ageing-related fiscal stress?

1. Subsidy rationalisation: Advises ageing States to reduce subsidies to manage rising pension and healthcare expenditure.
2. Human capital investment: Urges youthful States to invest heavily in education and skills to exploit a “window of opportunity.”
3. Labour-intensive growth: Recommends expansion of labour-intensive sectors to absorb the growing workforce.

Why is the RBI’s fiscal advice politically and structurally constrained?

1. Fiscal federalism imbalance: Population-weighted Finance Commission formulas reduce tax devolution to ageing southern States despite higher welfare burdens.
2. Delimitation impact: Upcoming delimitation reduces parliamentary representation of States that controlled population growth early.
3. Double disadvantage: Successful population stabilisation results in lower fiscal transfers and reduced political voice.

Are youthful States adequately positioned to harness demographic advantage?

1. Education spending stagnation: Share of State expenditure on education has stagnated or declined despite workforce expansion.
2. Employability gap: Persistent mismatch between education outcomes and job readiness.
3. Technological disruption: Workforce entry coincides with rising automation and AI-driven manufacturing, reducing labour absorption capacity.
4. Premature ageing risk: Possibility of “ageing before getting rich” due to weak industrial absorption.

How does ageing disproportionately affect women

1. Longevity-finance gap: Elderly women live longer but possess fewer financial assets.
2. Workforce exclusion: Majority of elderly women were never part of the formal workforce and lack pension coverage.
3. Policy blind spot: Workforce-centric ageing strategies exclude unpaid care workers and homemakers.
4. Social dependency: Absence of income security deepens dependence on family or State transfers.

Why can family-based elderly support no longer be assumed?

1. Migration patterns: Youth migration weakens intergenerational co-residence.
2. Nuclear families: Decline of joint family structures erodes informal care networks.
3. Safety net collapse: Assumptions of familial support no longer hold as a universal fallback.

What structural solutions does the article propose beyond fiscal adjustments?

1. Industrial policy shift: Job creation in new sectors such as green energy and the care economy.
2. Early institution-building: Youthful States must build healthcare and pension systems before fertility decline accelerates.
3. Social pension expansion: Large-scale expansion of non-contributory social pensions despite fiscal consolidation pressures.
4. Public geriatric care: Absence of State-funded geriatric infrastructure risks limiting “graceful ageing” to the wealthy.

Conclusion

India’s demographic transition demands a shift from narrow fiscal management to long-term social planning. Without early investment in public geriatric care, social pensions, and health systems, ageing will deepen inequality and strain federal finances. A balanced approach that links demographic responsibility with fiscal equity is essential to ensure that population change strengthens, rather than destabilises, India’s development trajectory.

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