In the coming decades, the percentage of elderly population in the southern states of India is set to grow at a higher rate than that in the northern and north-eastern states, which will cause the asymmetric income distribution gap to further widen and put divergent pressures on either side of this geographical divide, according to a recent report.
“In particular, in coming decades, we can expect huge migration from ‘Young North-India’ to ‘Elder South-India’ resulting in imminent pressure on Southern states in terms of infrastructure (both social and physical),” says a research report from State Bank of India (SBI).
In any country, an increase in the elderly population (age 65 years and above) leads to a drop in savings and a decline in the labour force leads to a decline in return on investment which reduces the investment rate.
As more and more people turning older in the selected states will move to old age pensions for subsistence and incur increasing health expenses, the report sees the savings and gross domestic product (GDP) of such states gradually declining.
Indian banks, on the other hand, the report says, will have to innovate to offer lifecycle-based deposit products for consumers. “Also, states that have younger populations would need to set up labour intensive industries to provide support to their young labour force,” it adds.
Even though is widely believed that India, being touted as young nation (compared to US and China), will remain young in the coming decades also, regional differences in this trend will become sharper with time.
SBI estimates that India’s elder population will increase to only 15.2% in 2050 from 5.5% in 2011, while the corresponding percentages for China and the US will be 32.6% and 23.2%, respectively, for the same period. India’s population is set to hit 1,780 million as per SBI as against World Bank estimate or 1,730 million of which 270 million will be of age 65 and above.
“Apparently, this will not pose any problem at the macro-level. But if we look at state-wise numbers, the numbers look alarming. By 2050 more than one fifth of total population of the four southern states like states Andhra Pradesh, Kerala, Karnataka and Tamil Nadu will turn elder. Similarly, states like Maharashtra, West Bengal, Odisha will see a large percentage of population turning old. With the increase in the elder population in southern states, the asymmetric income distribution gap will widen further,” the report says.
SBI says, “We believe that this will have implications on continued inter mobility of labour from east and north east India, which has been happening for last one decade, to South India and even Western India. States like Uttar Pradesh, Rajasthan, Assam, Bihar and Haryana will continue to have significantly young population even in 2050, thus engineering migration of such labour force to states that are ageing.”
The report notes that presently some southern States like Andhra Pradesh have started encouraging people to have more children in order to avoid a 'demographic crisis'. However, it will be difficult for some of the States to reverse the declining trend of fertility rate.
“Further, our analysis also reveals (evident from the FY17 State-wise per-capita income data) that the Southern States are already more prosperous than the Northern States and income-gap between the two regions is quite wide. For example, the per-capita income gap between Karnataka and Bihar stands at a whopping Rs 1.1 lakh and between Karnataka and the national average is around Rs57,000. Going forward, by 2050, the elder population in southern states will increase, which will widen the asymmetric income distribution gap further,” the report from SBI says.
Interestingly, the New World Wealth Report 2016 says that in south India Bengaluru has largest number of millionaires (7,700) followed by Chennai (6,600 millionaires). As people turn older in the selected States, the savings might initially soar but will eventually take a dip as people start living off old age pensions, with increasing health expenses cutting into their shrinking resources, the report concludes.