So, what are we trying to say when we repeatedly stress that 65 per cent of our population is below 35 years of age? We are not growing any younger. We are ageing. And that is a good thing. India became younger between 1951 and 1970 when the median age (the point at which one half of the population fall below and above) decreased from 21.3 to 19.4 years due to improved healthcare after Independence and rising incomes.
Since 1970, the median age has increased steadily as people live longer, and due to reduced fertility. By 2040, the proportion of the population below 34.5 years will fall to 50 per cent from 65 per cent today. Will that be terrible? Consider that we will then be in the same demographic boat that Singapore is today. Becoming Singapore in two decades is hardly a hardship.
The point here is that the advantages of a youthful population are exaggerated. There are 84 countries with a more youthful population than us today. None of them is competitive with India. The virtues of youth are likely to fade over time. Advances in artificial intelligence and heathcare will reduce the demand for manual work — which is best done by the young — whilst also prolonging productive life. This means that the definition of the workforce will change to include older folk — possibly up to 75 years — who will continue to earn, pay tax and pay-in rather than draw out from health insurance. Tata Sons and the BJP have already used the magic number of 75 years as a marker for obsolescence.
The Pradhan Mantri Jan Arogya Abhiyan being launched on September 25 will provide in-hospital medical insurance to 107 million families (45 per cent of the total number of families) at the bottom of the income and caste pyramid. Public health centres in 150,000 locations are to be upgraded to provide pre-hospitalisation diagnostics and preventive care. State governments have also taken the lead in launching similar schemes for health security.
The bottomline is that we should not emulate the paranoia of filmstars about ageing. Our collective shelf life is far longer than the first flush of youth or middle age. We should also not be nudged into having more babies to keep the median age low. China, with a median age of 37.4 years, is reversing its family size restrictions and doing just that. But their demographic transition, like their economic transformation, has been jagged and artificially staged via the heavy hand of State control. Ours has been a natural demographic transition driven by personal choice, higher incomes and better old age and health insurance.
What we do need to fear is that we may continue our business-as-usual approach which prioritises near term results over sustainable growth. If India is to grow up with dignity we need to transform our educational system to produce multilingual, multi-skilled and multicultural professionals, as capable of cooking up a meal, singing a song or cleaning their toilets as of designing a complex space mission.
There is another number which is being bandied about with alarm — the fact that the exchange rate of the Indian rupee versus the American dollar breached the 70-rupee mark last week. Our currency has been overvalued since 2013 because of a complex belief in a “strong” currency being a proxy for a “strong” nation. This belief is wrong on two counts. First, strength is best evaluated via the test of competitiveness. If our exports are not competitive because our currency is overvalued, relative to our peer exporters, then a strong rupee is merely false pride, not strength. Second, if strength is gauged from the ability of domestic producers to beat back the competition from imports and retain domestic marketshare, then a strong rupee works at cross purposes to this objective. It subsidises imports at the expense of domestic production. It taxes our exports and benefits our competitors like China.
The only thing a strong (overvalued) rupee achieves is to artificially reduce the landed cost of imported coal, petroleum products and military hardware. It also signals to foreign investors that exchange rate depreciation risks are minimal, thereby reducing the risk premiums they add on to the hurdle rate of expected return from their investments. To this extent it reduces the stress on our fiscal position, improves the external balance and also impedes inflation.
However, these advantages of a strong rupee must be evaluated against the numerous downsides. Since we are partly convertible on the capital account and Indians can invest abroad legally, a strong rupee reduces the risk for such investments and encourages the outflow of savings and foreign exchange. An unintended consequence is that hawala transactions, which remit savings abroad illegally, become attractive. It results in the loss of domestic value addition by producers; the loss of domestic employment and the loss of revenue from GST for the state governments, where producers have shut shop because of cheap imports. Consider also that a strong rupee actually encourages Indians to go on holidays and shop abroad rather than at home. It simultaneously makes India an expensive tourism destination, versus options in East Asia.
A belief in a “strong” INR is as shallow as male machismo. Setting the right level for the rupee, to optimise the complex trade-off, is best left to the Reserve Bank of India, which has the expertise and the information to strike this delicate balance. The rest of us must desist from creating false shibboleths of national strength. Our strength is best demonstrated by balancing our trade account without imposing prohibitive import or export tariffs; making our budget revenue surplus so that borrowings only finance investments and by following a need-based strategy for allocating resources for human capital development and social protection. None of these three milestones have been achieved yet.
Grow up India, collaboration is better than conflict; maximalist negotiating positions are self-limiting and the high from winning has diminishing utility unless the agenda ahead is compellingly uplifting.
