Sanjeev Sanyal warns against high pension promises: Birth rates are falling, who will pay?
Sanyal suggested that promising big pensions to a wide section won't be sustainable as birth rate is shrinking
- Dec 1, 2025,
- Updated Dec 1, 2025 5:09 PM IST
Economist Sanjeev Sanyal has cautioned that the governments must rethink how pensions are structured, warning that a declining youth population will make large future payouts unsustainable. Citing the continuous fall in fertility and birth numbers, he suggested that promising big pensions to a wide section won't be sustainable.
"Pensions are paid, by and large, by taxing the current workers to pay those who are retiring. Now, if you promised a large number of people a large number of pensions, and you have a shrinking youth in the future. What will happen? First of all, they'll be taxed at rates that are very high. Because they are having to not only pay their own burden but the burden of other people," Sanyal said in a podcast, TheOddCastShow.
The economist, who is also a member of the Prime Minister's Economic Advisory Council, warned that the burden of high taxes would push young people to leave. "Those young people will say, why should I work here. They will try to move out of those areas - maybe go abroad or not work. Because you'll make their work decision low. If I keep taxing people, they'll stop working. So, you will go down a spiral, which is very dangerous."
He said India must be cautious about fiscal commitments. "Do not load on debt and all kinds of cheap subsidies of various kinds. Do remember that the population that will have to repay those debts will be shrinking."
The pattern, he added, is already visible elsewhere: "Europe already faces this. Japan is beginning to face this as well. So, you will see this over the next decade or so playing out there. But remember, they will also eventually play down from here."
On India's demographic dividend Sanyal also spoke on the falling birth rate in the country and how it would impact the economy. He said India's birth numbers peaked more than two decades ago, when 29 million children were born in the year 2001. "After that, it has dramatically declined. We are now at 23 million and falling rapidly," the economist said. "So, we are well past the point where the peak number of children was born."
Sanyal noted that this cohort is entering the workforce now, powering the demographic dividend, but warned that the pipeline after that shrinks dramatically. Comparing India's trajectory with other countries, he said, China is now 9 million births per year. And Korea, for example, now has a fertility rate, which is one-third of what is needed for keeping a population stable.
He argued that such declines can directly threaten institutions. "If their birth rate does not go up in about a decade or two, their (Korea's) population will begin declining so fast that they will not be able to keep many of their universities running. They will not be able to keep municipal services running. Schools will have to shut down," he said, adding that similar patterns are already visible in parts of India.
On whether birth rates can be revived, he said no country has so far managed to do that. "Nobody in the world has so far been able to revive birth rates. Even in the Nordic countries, where it has stabilised, it has stabilised far below the replacement rate. That doesn't solve the problem. Even if it's not as bad as Korea, eventually the Danish population will also shrink. So, nobody in the world really knows the answer to this."
Sanyal added that no country in the world has, on a sustained basis, managed to increase its birth rates. "After all, China is aware of this. The Japanese have tried. Nothing has so far worked. So, I don't know what the solution is. It is a tricky problem. At the very least, we need to shut down all our population control programs. Even if we can't solve the problem, why add to it?
Economist Sanjeev Sanyal has cautioned that the governments must rethink how pensions are structured, warning that a declining youth population will make large future payouts unsustainable. Citing the continuous fall in fertility and birth numbers, he suggested that promising big pensions to a wide section won't be sustainable.
"Pensions are paid, by and large, by taxing the current workers to pay those who are retiring. Now, if you promised a large number of people a large number of pensions, and you have a shrinking youth in the future. What will happen? First of all, they'll be taxed at rates that are very high. Because they are having to not only pay their own burden but the burden of other people," Sanyal said in a podcast, TheOddCastShow.
The economist, who is also a member of the Prime Minister's Economic Advisory Council, warned that the burden of high taxes would push young people to leave. "Those young people will say, why should I work here. They will try to move out of those areas - maybe go abroad or not work. Because you'll make their work decision low. If I keep taxing people, they'll stop working. So, you will go down a spiral, which is very dangerous."
He said India must be cautious about fiscal commitments. "Do not load on debt and all kinds of cheap subsidies of various kinds. Do remember that the population that will have to repay those debts will be shrinking."
The pattern, he added, is already visible elsewhere: "Europe already faces this. Japan is beginning to face this as well. So, you will see this over the next decade or so playing out there. But remember, they will also eventually play down from here."
On India's demographic dividend Sanyal also spoke on the falling birth rate in the country and how it would impact the economy. He said India's birth numbers peaked more than two decades ago, when 29 million children were born in the year 2001. "After that, it has dramatically declined. We are now at 23 million and falling rapidly," the economist said. "So, we are well past the point where the peak number of children was born."
Sanyal noted that this cohort is entering the workforce now, powering the demographic dividend, but warned that the pipeline after that shrinks dramatically. Comparing India's trajectory with other countries, he said, China is now 9 million births per year. And Korea, for example, now has a fertility rate, which is one-third of what is needed for keeping a population stable.
He argued that such declines can directly threaten institutions. "If their birth rate does not go up in about a decade or two, their (Korea's) population will begin declining so fast that they will not be able to keep many of their universities running. They will not be able to keep municipal services running. Schools will have to shut down," he said, adding that similar patterns are already visible in parts of India.
On whether birth rates can be revived, he said no country has so far managed to do that. "Nobody in the world has so far been able to revive birth rates. Even in the Nordic countries, where it has stabilised, it has stabilised far below the replacement rate. That doesn't solve the problem. Even if it's not as bad as Korea, eventually the Danish population will also shrink. So, nobody in the world really knows the answer to this."
Sanyal added that no country in the world has, on a sustained basis, managed to increase its birth rates. "After all, China is aware of this. The Japanese have tried. Nothing has so far worked. So, I don't know what the solution is. It is a tricky problem. At the very least, we need to shut down all our population control programs. Even if we can't solve the problem, why add to it?