India’s youth, the driving force of the nation’s economy, face unprecedented economic challenges that threaten their financial stability and future security. With a population of over 1.4 billion, where more than 50 per cent are under 25 years old, the need for a robust social security system, particularly through mechanisms like the Employees’ Provident Fund Organisation (EPFO), has never been more critical.
Historically, India’s cultural ethos of “saving for the future” has been a cornerstone of resilience during economic downturns. However, rising economic volatility, shrinking real incomes, and a societal shift toward instant gratification are eroding this tradition, pushing young Indians to prioritise survival today over planning for tomorrow.
India is experiencing a concerning trend: real per capita income growth is lagging behind inflation, leaving individuals with less disposable income to save for their futures. Household savings as a percentage of GDP peaked at 25.2 per cent in 2009-10 but declined to 19.6 per cent by 2022-23 (RBI, 2023). This decline coincides with growing economic pressures: inflation, stagnant real wages, and market volatility.
For instance, India’s Consumer Price Index (CPI) inflation averaged 6.7 per cent annually from 2014 to 2023 (MoSPI), eroding purchasing power. Real per capita income growth, adjusted for inflation, has slowed to 2.5 per cent annually (World Bank, 2023), leaving little surplus for savings after meeting basic needs.
Young people, especially those entering the workforce amidst economic volatility, are finding it increasingly difficult to prioritise long-term financial planning over immediate survival. This is a worrying development, as history demonstrates the crucial role of savings in enabling individuals to navigate economic downturns. The cultural resilience ingrained in Indian society, built upon the foundation of saving for future security, is under threat as economic pressures and a culture of instant gratification take hold.
The youth, particularly those in urban areas, face additional pressures from a consumerist culture fuelled by quick commerce platforms. The rapid rise while offering undeniable convenience, has inadvertently cultivated a ‘discount’ culture where premium services, like rapid delivery, are often perceived as commodities to be obtained at the lowest possible cost.
These services, which promise delivery in 10 minutes, have conditioned young Indians to prioritise convenience over cost. India’s quick commerce market grew to $2.8 billion in 2023, driven by Gen Z and millennials. While the initial focus was on attracting consumers with low prices and discounts, the platform companies are now subtly raising fees to improve their unit economics.
This strategy may not be sustainable in the long run as customers resist paying for convenience, and the real income gains for gig workers remain minimal, potentially increasing their precarity. This shift in behaviour — favoring instant gratification over long-term planning — undermines the financial discipline that once defined Indian households.
The economic landscape for India’s youth is increasingly precarious. The unemployment rate for those aged 15-29 was 12.4 per cent in 2022-23 (Periodic Labour Force Survey), significantly higher than the national average of 4.1 per cent.
For those employed, particularly in the gig economy, real income growth is negligible. Gig workers, who number over seven million in India, often lack access to social security benefits like provident funds, despite deductions from platforms. These deductions, meant to secure their future, are often opaque, leading to distrust. A survey found 68 per cent of gig workers were unaware of how much was deducted from their earnings or how to access these funds.
This lack of visibility into social security contributions, particularly through the EPFO, is a significant barrier. The EPFO manages provident funds for over 60 million workers with contributions of 12 per cent of basic salary from both employees and employers. Yet, hurdles with delays in withdrawals, and negative word-of-mouth experiences have tarnished its reputation.
Unlike the US, where Social Security is a source of national pride, with 90 per cent of Americans over 65 relying on it as a primary income source, India’s EPFO struggles with a narrative of inefficiency. This perception overshadows its robustness as one of the largest social security systems globally, managing assets worth over ₹18.5 lakh crore.
India’s booming gig economy offers flexibility, but it often lacks traditional social security benefits. Gig workers are often excluded from employer-sponsored health insurance and retirement plans, making them particularly vulnerable to financial shocks and uncertainties.
This vulnerability is further exacerbated by the ‘discount’ culture, which can push down prices and limit the income potential of gig workers. A social safety net is crucial to ensure that the gig economy provides genuine opportunity and economic advancement for the youth.
History demonstrates that India’s saving culture has been a lifeline during crises. During the 2008 global financial crisis, India’s high household savings rate (23.6 per cent of GDP) cushioned the economy, enabling faster recovery compared to Western nations.
Similarly, during the Covid pandemic, families with savings were better equipped to handle income disruptions. However, the current economic environment — marked by inflation outpacing wage growth and rising costs of essentials — leaves little room for savings.
For instance, the cost of living in urban India rose by 7.2 per cent annually from 2018 to 2023, while nominal wage growth for low-skilled workers was only 4.5 per cent.
This squeeze pushes young Indians toward a survival mindset, where immediate needs trump future planning. The allure of quick commerce and subscription-based services exacerbates this, as disposable income is spent on conveniences rather than saved.
The EPFO’s role in countering this trend is critical, yet underutilised. By ensuring mandatory contributions for salaried employees, it provides a safety net that could secure the future of millions, if only its benefits were better communicated and accessed.
Social security for India’s youth encompasses various crucial aspects, including:
Financial security: Providing pensions, unemployment benefits, and disability support can help young people navigate periods of financial hardship and economic uncertainty.
Healthcare access: Universal health coverage ensures that young individuals have access to affordable healthcare without jeopardising their financial stability.
Skills development: Investing in vocational training and upskilling programmes empowers young people to adapt to the changing demands of the labour market and improve their long-term earning potential.
To restore faith in social security, the EPFO must adopt a stronger narrative, akin to the US Social Security system’s public perception. Simplifying access to funds, improving transparency through digital platforms, and educating youth about the long-term benefits of provident funds are essential steps.
Recent changes with mobile app with real-time balance updates and withdrawal options has initiated to bridge the trust gap. Additionally, integrating gig workers into the EPFO framework, with clear visibility into contributions, would extend social security to a vulnerable demographic.
The cultural ethos of saving, once a hallmark of Indian resilience, must be revived through education and policy. Schools and workplaces could promote financial literacy, emphasising the power of compound interest in provident funds.
For example, a monthly contribution of ₹2,000 at an 7.1 per cent interest rate could grow over ₹1 crore in 40 years, offering significant retirement security. Public campaigns highlighting such benefits could shift perceptions, making social security a source of pride.
Addressing the challenges posed by economic volatility, the decline in savings, and the precarious nature of gig work requires a multifaceted approach, including:
Promoting financial literacy: Equipping young people with the knowledge and skills to manage their finances responsibly is essential.
Encouraging savings: Government policies and financial institutions should create a supportive environment for saving, especially among the youth.
Expanding social security coverage: Ensuring that all young workers, including those in the informal and gig economies, have access to adequate social security benefits is crucial.
India’s youth stand at a crossroads, caught between economic pressures and a fading culture of saving. The EPFO, despite its challenges, remains a robust tool to secure their future.
By addressing accessibility issues, enhancing transparency, and fostering a narrative of empowerment, India can revive its saving ethos. In a world of quick commerce and instant gratification, prioritising social security will ensure that the youth of today are not just surviving but thriving tomorrow.
The writer is Executive Director of Indian Staffing Federation (ISF)
