The World Bank warns that South Asia's demographic dividend is fading as its working-age population growth slows.
By 2034, the region will reach its peak working-age share, transitioning to an aged economy by 2049.
This rapid shift, coupled with low per capita income, threatens economic stability and demands urgent policy action.
South Asia, hosting around 22 per cent of the world’s working-age population, is aging faster. And it is a warning sign for one of the poorest regions of the world.
“In less than a decade, South Asia’s working-age population will peak and start shrinking. By 2049, it will be an aged regional economy with 14 per cent of its population aged 65 and older,” says the World Bank in its report “Demographic Change in South Asia: From Tailwinds to Headwinds for Development” released on November 3.
The South Asia region that includes India has around 22 per cent of the world’s working-age population. This means every fifth worker in the world lives in this region.
“Demographic tailwinds (the first demographic dividend) boosted growth over the past several decades as more adults entered their prime working years and had fewer dependents to support,” according to the report.
This demographic shift contributed an estimated 0.4 percentage point annually to the region’s gross domestic product (GDP) growth. In India, the contribution is estimated at 0.5 percentage points. The expanding working-age population also boosted annual labour productivity growth by 0.4 to 1.1 percentage points.
But this demographic dividend is now fading. “Working-age population growth in South Asia, which averaged 2.2 per cent a year between 1960 and 2023, is projected to fall to 0.6 per cent a year between 2024 and 2050,” the report says.
The shrinking working-age population will significantly reduce the contribution of demographic factors to economic growth. “The contribution of demographics to GDP growth is expected to shrink by three-quarters, to about 0.1 percentage point a year over the same period. By 2034, the working-age share of the population will peak in the region; by 2049, the region will cross into aged status,” the World Bank estimates.
India’s working-age population will peak in less than a decade.
South Asia’s transition from an ageing to an aged population is happening faster than in many other regions. Worryingly, this transition is unfolding when the region’s average per capita income remains among the lowest in the world.
“The average developing economy has taken 32 years to transition from aging to aged. South Asia will do so in 25 years, and have less time to create jobs and build systems to manage this transition,” says the World Bank.
Nearly 60 per cent of South Asia’s working-age population is employed, with most workers engaged in the informal sector. A decline in the working-age population may constrain economic growth while increasing the burden of supporting an ageing population with limited economic and social protection systems.
For instance, the International Labour Organization says that in South Asia Region the long-term care workforce need will double from 13 million in 2023 to 31 million in 2050.
The Bank says, “South Asia faces two demographic challenges at once: maximizing the remaining benefits from a still-growing working-age population while preparing for aging.”
“Without healthier and more skilled workers, robust social protections, and more and better-paying jobs, the region risks missing the opportunity to turn its large working-age population into sustained economic gains,” says the Bank.
