CEA Nageswaran flags short-term savings bias as India's population ages

V Anantha Nageswaran said Indians are increasingly willing to take market risk, but have yet to commit savings for longer tenures needed to finance retirement

India’s growing appetite for equities and mutual funds (MFs) has not yet translated into a comparable shift towards long-term retirement savings, Chief Economic Advisor (CEA) V Anantha Nageswaran said on Thursday, flagging the country’s short-term savings behaviour as a key challenge to ensuring financial security in old age.

 

“The Indian saver has shown a willingness to accept market risk — or so we would like to believe. What the saver has not yet done at scale is to commit savings for a longer tenure,” Nageswaran said at the Pension Fund Regulatory and Development Authority’s NPS (National Pension System) Diwas event.

 

The CEA said India’s ageing population made it imperative for households to accumulate savings over longer tenures, while financial markets would need to channel these savings into productive, long-duration investments.

 

 

According to the Economic Survey 2025-26 (FY26), the share of equity and MFs in the annual financial savings of Indian households rose from around 2 per cent in 2011-12 to 12-15 per cent in 2024-25. Over the same period, the share of bank deposits declined from more than 58 per cent to around 35 per cent.

 

Monthly inflows into systematic investment plans also rose sharply, from less than ₹4,000 crore in 2016-17 to more than ₹28,000 crore in the first eight months of 2025-26. However, the share of pension and insurance assets in household savings remained unchanged between 2018-19 and 2023-24 (FY24), Nageswaran said.

 

India’s total pension assets are around 17 per cent of gross domestic product, compared with at least 80 per cent in the Organisation for Economic Co-operation and Development economies.

 

To increase India’s pension coverage, financial sector institutions also need to build greater trust among pension subscribers, Financial Services Secretary Sanjay Lohiya said at the same event.

 

He stressed that pension savings should not be treated like regular investment products. “Pension funds need to keep in mind that these are not investments like any other financial product, given that they are intended to provide income and financial security after retirement,” Lohiya said.

 

The pension system also needs to examine how much flexibility can be provided to subscribers in contribution-based schemes, including mechanisms to remind people to make their contributions, he added.

 

Nageswaran said India’s demographic transition would make retirement planning increasingly important.

 

Citing the India Ageing Report 2023 of the United Nations Population Fund, he said the share of Indians aged 60 and above was 10.1 per cent in 2021 and was projected to rise to 15 per cent by 2036 and 28 per cent by 2050. By 2050, India could have around 347 million people aged 60 and above, he said.

 

A person reaching 60 can currently expect to live another 18.4 years on average, while the corresponding figure for women is 19.6 years, according to the Sample Registration System.

 

“Retirement in India is therefore no longer a short epilogue. It is close to two decades of life on average — and could be longer — that must be financed from savings made during the working years,” Nageswaran said.

 

At the same time, India still has a relatively favourable demographic window.

 

The old-age dependency ratio is currently around 16 older people for every 100 people of working age, he said.

 

Nageswaran also identified informality as a major constraint to expanding pension coverage. The Economic Survey for FY26 had also described it as the “central constraint” to achieving broad-based pension inclusion.

 

The Periodic Labour Force Survey for FY24 showed that 53.4 per cent of regular wage and salaried employees outside agriculture were not eligible for any social security benefit, he said.

 

Nageswaran also highlighted the role of pension savings in financing the economy, describing them as among the longest-duration and most patient forms of capital available to an economy.

 

“As pension assets grow, that is where they can do the most good: in financing long-lived assets with sound underlying returns,” he said, observing that India’s infrastructure needs over the next two decades would require long-term capital.

 

At the end of September, the NPS managed around ₹18 trillion, of which about 47 per cent was invested in government securities, 28 per cent in equity, and 21 per cent in corporate debt, he said.

 

Such investments finance government borrowing, corporate balance sheets and, through bonds and infrastructure investment trusts, long-gestation projects, Nageswaran said.