Demographic Dividend and Role of Boomers in India's Aggregate Savings

Ishika Jaiswal, Indian Institute of Management (IIM)

For more than last 20 years, India's working-age cohort is nearly 60% while the gross domestic savings significantly declined during the past decade, reaching a low of 29.16 % of GDP in 2020 revoking the notion that the growing population in the working-age cohort will bring a surge in aggregate savings. Previous research. Analyzing the role of boomers in realizing the demographic dividend, the study examines the impact of share of boomers in the working-age cohort on aggregate savings, alongside significant variables, utilizing data from 1995-2020 deploying the ARDL and ECM approach. The initial findings suggests that there is a long-term relationship between the dependent variable and the independent variables and the  impact of boomers on aggregate savings is statistically significant. The relationship is negative in the short-run while positive in the long-run due to changes in the consumption patterns, standard of living, inflationary pressures and interest rates. In India, the Real Gross Domestic Product positively impacts the Gross Domestic Savings, however the relationship turns negative when it comes to Per Capita GDP. This dichotomy stems from structural disparities in the distribution of income and wealth across population composition, alongside varying consumption and savings behaviors of boomers at distinct phases of economic development.

Keywords: Economic Demography, Population and Development, Population Policies, Human Capital, Education, and Work

See extended abstract.