From Dividend to Durability: Preparing India for an Ageing Workforce
A strategic reset across labour markets, fiscal systems, and technology adoption can turn population ageing into a new source of resilience and productivity
A background note can be accessed here: IMF Forecast on India’s Population Aging
Dr. Ishika Jaiswal: Former Faculty, IIM Sambalpur
SDG 3: Good Health and Well-being | SDG 8: Decent Work and Economic Growth
Ministry of Labour and Employment | Ministry of Skill Development and Entrepreneurship
The IMF projects that India’s demographic dividend will gradually diminish as population ageing accelerates. What policy interventions are most critical for sustaining longer working lives and raising productivity per worker?
India’s demographic shift is unmistakable: fewer young entrants and a steadily expanding share of older adults. To maintain productivity, the labour-market strategy now has to revolve around keeping people in work longer and making that work more productive. The priority is reducing premature exits from the workforce by improving access to preventive care, workplace wellness, and early screening. This is less about welfare and more about preserving and extending human capital.
Equally important is redesigning work itself – with flexible schedules, phased retirement options, and age-friendly roles that allow older workers to stay engaged without compromising wellbeing. Skill renewal will also matter: mid-career and late-career workers need continuous upskilling to stay productive as technology adoption accelerates.
Female workers, whose participation remains low, can be a major buffer if supported through reliable childcare, safe mobility, and more flexible employment terms. At the sectoral level, India must expand opportunities in higher-productivity services and modern manufacturing so that each worker contributes more, even as their numbers grow slowly.
A labour-market reset built around healthier, longer, and more flexible working lives can help India manage demographic ageing without losing economic momentum.
As the share of older persons rises, India will face growing fiscal pressures around pensions, healthcare, and long-term care. How should India recalibrate its fiscal strategy and social-infrastructure investments to prepare for ageing without compromising growth momentum or intergenerational equity?
India’s rising old-age dependency ratio will reshape public finances long before it reshapes the labour market. The challenge is to prepare early so that pensions, healthcare, and long-term care do not crowd out investments in education, skilling, and infrastructure. The fiscal response should start with strengthening contributory systems: expanding portable, low-cost pension schemes, improving compliance, and gradually aligning retirement norms with rising life expectancy.
On the spending side, the priority is building an ageing-ready social infrastructure – primary healthcare networks, community care services, and assisted-living facilities – especially in smaller towns and rural areas where gaps are large. Early investment lowers future costs and reduces the risk of sudden fiscal shocks. At the same time, smarter delivery through digital platforms can curb leakages and reduce administrative overheads.
Maintaining equity across generations will require widening the tax base while phasing out subsidies that no longer match demographic needs. A calibrated mix of fiscal prudence and targeted social investment can help India manage ageing pressures without sacrificing growth or overburdening its younger population.
The IMF notes that technological upgrading and structural shifts will be essential to offset declining labour-force growth. How can India align automation, lifelong learning, and sectoral transformation policies to ensure that population ageing does not become a drag on productivity and economic dynamism?
As labour-force growth tapers, India’s productivity gains must increasingly come from technology and smarter sectoral allocation, not from sheer numbers. Automation and AI can lift output per worker, but only if adoption is paired with a skilling strategy that prepares workers, especially mid-career and older workers, for new, tech-enabled tasks rather than pushing them out. This calls for a national ecosystem of modular, stackable credentials that workers can access multiple times over their careers, delivered through public–private partnerships and tightly linked to industry demand. Without this, automation risks becoming labour-displacing rather than productivity-enhancing.
India also needs to anticipate how ageing will reshape consumption: rising demand for healthcare, wellness, and community services, and new openings in assistive technologies, elderly care, and precision health. Steering investment and innovation into these emerging sectors can generate high-productivity jobs that align with demographic change.
Combined with smoother job-matching systems and portable benefits, this mix of technological upgrading and sectoral reorientation can ensure that an ageing workforce becomes a catalyst for innovation and competitiveness, not a drag on economic dynamism.
Author:
Views are personal.