India's Demographic Crossroads: Securing an Ageing Population in a Low-Fertility Future

What is the core demographic shift India is experiencing?

India has officially entered a new demographic phase defined by low fertility. The latest Sample Registration System (SRS) data shows the country’s Total Fertility Rate (TFR) has fallen to 1.9 children per woman, below the replacement level of 2.1 required to maintain a stable population (Source: The Hindu, citing SRS data). This figure is also below the current global average of 2.2, marking a historic turning point for a nation long associated with high population growth.

This national average, however, conceals vast sub-national disparities. The demographic transition is not uniform, creating what economist Amarendu Nandy calls multiple “demographic economies” within one nation. Urban India's TFR has dropped to 1.5, while rural fertility hovers around the replacement mark. The most pronounced divide is geographical, with the SRS data showing states like Delhi (TFR of 1.2), Kerala (1.3), Tamil Nadu (1.3), and West Bengal (1.3) exhibiting fertility rates lower than many developed nations like the United States (1.6) and Japan (1.3).

In stark contrast, states like Bihar (2.9), Uttar Pradesh (2.6), Madhya Pradesh (2.4), and Rajasthan (2.3) still have fertility rates well above the replacement level. This divergence means that while southern and metropolitan India are ageing rapidly, a large cohort of young people will continue to enter the workforce from the northern and central states for at least the next two decades.

Why is this transition particularly challenging for India?

A central challenge, as highlighted by economists, is that India is ageing at a much lower level of income compared to countries that have previously undergone this transition. Historically, nations in Western Europe and Japan experienced demographic ageing after achieving high levels of industrialisation and building robust, tax-funded welfare states. For instance, Japan's public debt surged past 200% of its GDP as it financed its ageing society, but it did so from a position of high per-capita income (Source: The Hindu). India, by contrast, is entering this phase with a per-capita income of around $2,800 as of 2024 and a weaker institutional foundation.

The government's fiscal capacity to fund a comprehensive social security system is constrained. The direct tax base is narrow; according to Central Board of Direct Taxes (CBDT) data, net direct taxpayers constitute only about 6% of the total population. Furthermore, the labour market is predominantly informal. The Periodic Labour Force Survey (PLFS) 2022-23 indicates that over 90% of the workforce is in the informal sector, lacking formal contracts or employer-sponsored benefits. This economic structure makes it difficult to implement the kind of contribution-based social insurance models that have supported ageing populations elsewhere.

How are existing social security systems equipped for this change?

An assessment of India's social safety nets reveals significant gaps in coverage and adequacy for the coming challenge. The government's approach is a mix of contributory schemes and direct social assistance. The Atal Pension Yojana (APY), a contributory pension scheme launched in 2015 for unorganised sector workers, assumes a capacity for sustained, regular contributions. This is a difficult proposition for informal workers whose incomes are often volatile, limiting its reach among the most vulnerable.

The primary non-contributory scheme is the old-age pension under the National Social Assistance Programme (NSAP), a Centrally Sponsored Scheme that draws its mandate from the Directive Principles in Article 41 of the Constitution. The central government's contribution to this pension remains at ₹200 per month for individuals aged 60 to 79, and ₹500 per month for those aged 80 and above. These amounts, set in 2007, have not been revised and offer limited protection against poverty in an inflationary environment. The Union Budget for 2024-25 allocated approximately ₹9,652 crore for the NSAP.

Data from a NITI Aayog report underscores this vulnerability: an estimated 78% of India's elderly have no pension cover, and 70% are dependent on others for their financial needs (Source: The Hindu, citing NITI Aayog). This highlights a massive gap between existing provisions and the actual needs of the 150 million Indians currently aged 60 and above.

What are the wider social and federal implications?

The demographic shift extends beyond economics, deeply affecting social structures and federal dynamics. For generations, the joint family system served as an informal welfare provider, a role now eroding due to urbanisation, migration, and increasing female participation in the workforce. Studies by organisations like the United Nations Population Fund (UNFPA) on elderly parents 'left behind' by migrating children show that while remittances may improve financial status, they often lead to increased loneliness and health vulnerabilities.

This transition also has a critical federal dimension. The fastest-ageing, more prosperous states in the south and west will increasingly face labour shortages, creating a demand for workers from the younger, populous northern states. This migration can be a source of national economic balance, but only if 'source' states invest in education and skills to prevent their youth from merely entering low-wage informal jobs.

Simultaneously, 'destination' states must evolve policies to treat migrants as full-fledged citizens. A key policy imperative, as argued by analysts at the Centre for Policy Research, is to ensure the portability of welfare benefits—such as ration cards, health insurance, and pensions—across state lines. Without this, a national labour market cannot function effectively, and migrants will remain vulnerable, particularly in their old age.