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Changed outlook

Non-urban India has remained blindsided for decades in terms of superannuation, benefits, and social security. Rural India will now catch up with its urban counterpart at a quicker pace

Nilanjan Dey Published 12.10.23, 06:12 AM
Representational image.

Representational image. File Photo

There is now sufficient evidence that small towns in India are warming up to the idea of organised retirement, a trend reflected in elevated savings and investment patterns, especially in pension plans and sundry schemes aimed at social security. One may view this in the context of rapid urbanisation, implosion of joint families, availability of easy credit, financialisation of savings, and, above all, use of smart technology.

The situation is in sync with our overall income and expenditure patterns. The aam aadmi is now earning more, spending more, investing more. In fact, consumption trends are morphing like never before — the profusion of value-added premium products are a testament to this. We are moving from being a land of archetypal low-income earners to a median-income country.


India’s per capita income is expected to move from the present level of about USD 2,500 to approximately USD 4,000 by the end of this decade. This will find a vent in individual earning and spending benchmarks. Investments, too, will be impacted. Capital appreciation and income generation will remain firmly on the radar and retirement awareness will emerge stronger.

There will be a deviation from the past. Non-urban India has remained blindsided for decades in terms of superannuation, benefits, and social security. Rural India will now catch up with its urban counterpart at a quicker pace.

That takes us to the developed world, especially to nations with well-entrenched retirement systems, where such phenomena have been already observed. Pension penetration is remarkable in the Netherlands, Switzerland and Canada. These are highly pensioned societies, each characterised by an evolved market for actively-managed retirement plans. Some of them can actually serve as role models for developing nations such as India.

But India has a lot of catching-up to do because of several factors that are working against our interests. For instance, India faces a longevity risk. This means many ordinary citizens will outlive their savings, heightening their dependency profile. A large number of Indians will depend financially on children or other family members when their active income-earning years end. In a country where certain traditional demographic dividends are said to be waning, an escalation in the dependency rate will compound the situation in the days ahead.

That will not, however, deter the average Indian from seeking more opportunities in the retirement market. Some of the age-old investment routes are losing their popularity. Deposits, for example, are not feted any more in discerning circles. The fact is that inflationary pressures are quite strong at the moment; this is keeping a number of people away from old-school, fixed-income options. Traditional retirement plans have in the past relied almost entirely on such options. New-age solutions happen to be different and the idea of fluctuating but market-determined returns is gaining currency. Non-urban locations will do increasingly better on this front in the time to come. A surge in retirement plans is quite likely to be seen here. In particular, Tier II and Tier III centres will be closer to the forefront of the impending change.

These will be good tidings for policy-makers who have wanted such a change to set in. The government has initiated several important policies to expand the social security network and encourage organised retirement planning. Reforms initiated by the Pension Fund Regulatory and Development Authority have ensured greater inclusion and diversity. Today, more ordinary people are covered by the new pension system than ever. But with a population of 140 crore, we must think about the retirement crisis we face. The crisis is two-fold. One, government institutions cannot spend enough on social security schemes. Two, individuals are underprepared in pecuniary terms to sort out post-retirement problems.

Superannuation poses severe financial challenges. That non-urban communities are building up a stronger case for retirement planning is encouraging.

Nilanjan Dey is a retirement planning educator

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