How Population Growth Can Affect Your Income

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How Population Growth Can Affect Your Income
How Population Growth Can Affect Your Income
Nilanjan Dey - 04 February 2023

The dark side of the moon is always unfathomable, beyond reach. The fact that China’s population count is decelerating, bares India to a darkness that can be troubling.

As the next census will surely demonstrate, India will become the world’s most populous country, and our elevated status, or our very own crown of thorns, will appear sooner than most of us had thought.

The emerging demography will complicate a situation that already has certain delicate issues attached to it and draw the nation’s attention to our “dependency ratio”.

This sinister metric is often used to assess the number of dependents for every hundred economically productive people in a country. The dependency ratio will lead us to the number of citizens who are either under 15 years of age, or 65 or older­.

As in several countries in the Third World, we are not in a comfortable position on this front. The sheer number of Indians financially dependent on others­—family members are the obvious sources of support—will boggle the mind. More so when one considers savings, expenses, and investment patterns.

For a large section of the population, these are already inadequate. The situation, 75 years after we became independent, will indeed get compounded if our dependency ratio turns for the worse.

For the record, Indians are living longer (which poses a longevity risk) and increasingly moving away from traditional family orientations, and time-tested practices and customs. Families are becoming smaller in size, too.

Given these trends, the rise in the number of dependents will further strain our socio-economic fabric. It will be worrisome for planners. The narrative, if narrowed down to a more common topic, will upset investment programmes carried out by ordinary people.

Resources will have to be re-directed. Drawings will become more frequent, and savings will start depleting faster. Elderly parents and other seniors in the family will have to be provided for, while children must be taken care of in all respects—education and health in particular.

The scenario may complicate further due to the price rise. Despite all the inflation-control devices deployed by the Reserve Bank of India (RBI), it is raging wantonly.

While such steps have helped calm inflation, commoners look for a more meaningful impact. For the record, the consumer price index (CPI) stood at 5.72 per cent in December, a slight drop from the prior month. Retail prices will likely fall further by the end of the current fiscal year. But price rise remains the investor’s relentless enemy.

To return to our main point, education and health are emblematic of the inflationary trend.

Savers, therefore, brace for a rough period—higher healthcare and tuition bills, courtesy, seniors and juveniles. A major outgo will be towards sustaining financial commitments made for others.

The real cost of the situationwill,of course, be more macro. Fresh investments will not occur as spontaneously as predicted. New allocations may lose steam in the process. The investment playbook, for instance, may see termination or non-continuation of systematic investment plans (SIPs). Retail sales of investment products will indicate how the circumstances are shaping up.

The asset management industry, nevertheless, remains ebullient. Aggregate SIPs, after all, are pulling in excess of Rs 12,000 crore every month. This, it is felt, is a proxy for overall retail interest in the capital markets.

Financially dependents, however, will not care much about such statistics. Stretching the budget will be more relevant for the worst hit. The middle class, greying and financially enfeebled, will be hit. Savings will be tapped, and a part of it will deplete early as lifespans get stretched.

China’s declining population and our’s increasing should serve as a clarion call for our policymakers. The Indian economy, with its $5 trillion dream, is set to undergo incredible changes. There may well be multiple crises to encounter, severe lapses in delivery, great schisms between the haves and the have nots. The dark side of the moon will remain unreachable unless our mavens try harder.

The author is Director, Wishlist Capital

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