Growing Old Before Growing Rich? World Bank Sounds Alarm Over South Asia's Economic Future

South Asia risks losing its demographic advantage as population aging, weak job creation, skills shortages and inadequate healthcare and pension systems threaten future economic growth. The World Bank urges governments to invest in productive employment, education, women's workforce participation and social protection to turn demographic challenges into long-term economic opportunities.

South Asia is approaching a major demographic turning point that could reshape economic growth, employment, healthcare and social protection over the coming decades, according to a World Bank Group study prepared by researchers from its Office of the Chief Economist and South Asia human development teams. The report, Demographic Change in South Asia: From Tailwinds to Headwinds for Development, examines Bangladesh, Bhutan, India, the Maldives, Nepal and Sri Lanka, warning that the region risks growing old before becoming sufficiently wealthy. It urges governments to create productive jobs, improve education, expand women's employment and strengthen retirement security before the economic benefits of a large working-age population begin to disappear.

South Asia has approximately 1.66 billion people, including 1.17 billion of working age. For decades, this expanding workforce has supported economic growth by increasing production, consumption and savings. Since 2000, favourable demographic conditions have contributed an estimated 0.4 percentage point annually to regional economic growth. However, working-age population growth is projected to slow from a historical average of 2.2 percent to just 0.6 percent during 2024–2050, raising concerns about future productivity and economic stability.

South Asia's Demographic Advantage Is Running Out

The region's working-age population share is expected to peak at approximately 69 percent in 2034. By 2049, at least 14 percent of residents will be aged 65 or older, marking South Asia's transition into an aged society. Sri Lanka is expected to reach this threshold by 2030, while Bangladesh and Nepal have longer periods to benefit from their expanding workforces.

The speed of this transition poses serious challenges, as governments must address unemployment, poverty, and rising healthcare costs while preparing to support millions of older citizens. Unlike wealthier economies that developed pension and healthcare systems over several decades, South Asian countries face tighter financial constraints and less time to prepare.

The report warns that demographic advantages do not automatically generate prosperity. Countries must create productive jobs and strengthen economic institutions to turn workforce potential into sustained growth.

Jobs Crisis, AI Disruption and Education Gaps Threaten Growth

Employment remains one of South Asia's biggest weaknesses. Only 60 percent of working-age people are employed, compared with 69 percent in other emerging and developing economies. Approximately 88 percent of workers are informally employed, often without reliable wages, pensions or social protection.

Formal businesses are also creating jobs too slowly. Employment in formal firms grows by approximately 2.7 percent annually, compared with 5.4 percent in other emerging and developing economies. Infrastructure shortages, regulatory barriers, limited investment and inadequate workforce skills continue to restrict business expansion.

Artificial intelligence could intensify these challenges. Since generative AI tools became widely available in late 2022, job advertisements in occupations highly exposed to automation have declined by approximately one-fifth. Routine accounting, call centre services and administrative jobs face growing disruption, making digital training increasingly important.

Education and nutrition weaknesses further threaten productivity. Between five and six out of every ten primary-school-age children are either outside school or unable to read a simple passage by age ten. Around 32 percent of children younger than five experience stunted growth.

Women's limited economic participation represents another major missed opportunity. Female labour force participation stands at approximately 35 percent. Better childcare, safer transportation and stronger workplace protections could help millions of women enter productive employment.

Aging Population Puts Healthcare and Pension Systems Under Pressure

South Asians are living longer, but not necessarily healthier lives. Life expectancy reached approximately 72 years in 2023, while healthy life expectancy remained around 61 years. Noncommunicable diseases, including diabetes, cancer and cardiovascular conditions, now account for nearly two-thirds of the region's disease burden.

Healthcare systems remain poorly prepared to manage chronic illnesses, while high household medical expenses weaken financial security. Demand for elderly care is also increasing. The required long-term care workforce could rise from approximately 13 million in 2023 to 31 million by 2050.

Retirement insecurity presents another serious concern. Only 17 percent of working-age South Asians actively contribute to pension schemes, while just 10 percent of older people receive contributory pension benefits. Merely 6 percent of adults save specifically for retirement, leaving millions financially vulnerable as they age.

The report recommends expanding pension coverage, improving healthcare financing and developing affordable community-based elderly care services.

Policy Reforms Could Turn Demographic Risks Into Economic Opportunities

The World Bank argues that South Asia can still benefit from its demographic transition through timely reforms. Investments in education, workforce training, healthcare and women's employment could substantially improve economic productivity.

Its projections suggest that ambitious improvements in human capital and women's workforce participation could raise GDP per capita by 2050 by approximately 19 percent in India and 13 percent in Bangladesh and Sri Lanka, compared with a scenario without these reforms.

Governments must also improve infrastructure, encourage private investment, expand formal employment and strengthen pension systems. International labour mobility could create additional opportunities as aging economies in Europe and East Asia seek skilled workers.

However, financing these reforms remains difficult. South Asia's tax-to-GDP ratio averages below 12 percent, limiting public investment in essential services.

The next decade will be decisive. Without coordinated action, aging could weaken economic growth, increase fiscal pressures and deepen household insecurity. With stronger employment policies, better healthcare and sustainable retirement systems, South Asia could transform its remaining demographic advantage into lasting prosperity.