Contingencies Online - July/August 2009

Pension Reform in India’s Emerging Economy
SINCE 1991, there have been significant changes in the functioning
of India’s banking, insurance, and capital markets sectors. Following the
formation of the Insurance Regulatory and development Authority in
december 1999, India’s insurance sector has been opened to private
companies, both domestic and multinational. Changes in the functioning
of India’s pension sector took place with the August 2003 establishment
(through an executive order) of the Pension Funds Regulatory and devel-
opment Authority (PFRdA), even though the PFRdA bill is still pending.

TaBlE 1 Demographic Profile of India year 1981 Population size (in millions) 683.33

1991 current

846.30 1027

(2001)

Crude birthrate per 1,000 population 33.9 29.5 23.8

(2005)

At present, the Indian economy is developing rapidly. Per capita income is increasing, the standard of living is improving, and a notable percentage of the population is coming out of poverty. Unfortunately, at the same time that the population is living longer, support of the elderly through India’s traditional joint-family system, where brothers (and unmarried sisters) provide for aging parents, as well as the dependents of any deceased brother, is eroding. Owing to increasing cost, gov-ernment-sponsored pension schemes are threatened. India needs to further reform its pension system not only to control government expenditures but also to protect its citizens against poverty in old age.

Crude death rate per 1,000
population
total fertility rate per woman

12.5 9.8 7.6

(2005)

demographic Transition

4.5 3.6 2.9

(2005)

Infant mortality rate per 1,000 live
births
life expectancy at birth (in years)

110 80 58

(2005)

54.4 60.3 65.4

Aging populations are a global phenomenon, and India is no exception to the rule. India accommodates about 17 percent of the world’s population, of which 7.6 percent are elderly.

(2001-2006) literacy rate (percentage) 43.57 52.20 65.37 (2001) — 17.94 15.37 (2001) Source: Economic Survey of India 2006-2007 TaBlE 2 Indian Demography in Transition

Proportion of children (newborn – 6 years)

Higher education, late marriage, increasing work pressure, and a higher proportion of women in the workforce are among the factors responsible for India’s diminishing birthrate. Improvements in medical science, better health care, and sanitation are factors for India’s diminishing death rate and consequent longer life expectancy.

NARVIKK / ISTOCK

Population in millions (percent of population) year 2006 2011 2016 < 15 years 357 (32.1) 347 (29.09) 340 (26.79) 15 – 64 699 (62.86) 780 (65.38) 851 (67.06) years