South Asia’s demographic window is closing

Kathmandu, Nov. 3

The World Bank has warned that the window to demographic dividend for the South Asia region is gradually closing.

South Asia has an opportunity to capitalise on a working-age population that numbers 1.17 billion people, but this window is gradually closing, it said in its latest report 'Demographic Change in South Asia: From Tailwinds to Headwinds for Development', released on Tuesday. 

According to the report, in less than a decade, South Asia’s working-age population will peak and start shrinking. By 2049, it will be an aged regional economy with 14 per cent of its population aged 65 and older.

Since 2000, a growing share of adults in their prime working years has helped expand South Asia’s GDP by 0.4 per cent and raise its labor productivity by 1.1 per cent per year.  "But South Asia has begun to age. South Asia’s transition from an aging to an aged population is proceeding at a faster pace and at a lower level of income per capita than in comparable emerging market and developing economies," the multilateral donor said in a statement.

The average developing economy has taken 32 years to transition from aging to aged. South Asia will do so in 25 years, and have less time to create jobs and build systems to manage this transition, according to the report. The annual contribution of demographics to GDP growth will shrink between now and 2050, to 0.1 per cent. 

“South Asian economies are aging faster and earlier in their development journeys. They need to act now to adopt policies and build infrastructure that create more and better jobs and deepen the gains from their ‘youth dividend’, while at the same time preparing for aging," said Johannes Zutt, World Bank Vice President for South Asia.

“This will enable South Asia to make the most of its large working age population and lay the foundations for a ‘second dividend’ as healthier older people continue contributing to the economy,” he added.  

The challenge is compounded by a jobs gap. Only 60 per cent of South Asia’s working age population is employed, and 88 per cent of employed workers work informally, with lower earnings and less job security.  Without healthier and more skilled workers, robust social protections, and more and better-paying jobs, the region risks missing the opportunity to turn its large working-age population into sustained economic gains.  

At the same time, health care, long-term care, and pension systems remain ill-equipped to meet the needs of a population that is living longer but not necessarily healthier, said the World Bank. Only 17 per cent of South Asia’s working age population contribute to a pension scheme, and only 10 per cent of older South Asians receive any pension benefits, the lowest coverage globally.   

According to the World Bank, the report offers a roadmap for South Asian countries to act on both fronts. They can sustain the 'youth dividend' by creating more productive jobs, expanding access to finance for MSMEs, streamlining regulations, improving health, education and skills, and removing barriers to women’s employment. They can also unlock the 'second dividend' through stronger healthcare, long-term care and pension systems that support people as they age, alongside greater savings and investments that raise productivity.

 

High informality a challenge in Nepal

Informal employees earn 45–84 per cent less than formal employees in Bangladesh, India, Nepal, and Sri Lanka, representing a large loss of income and productivity, said the report. More than 60 per cent are employed informally in Nepal. Informal jobs tend to be less productive, carry substantial wage penalties, and represent lost output and income.

However, through the Social Security Fund, a contributory social insurance scheme financed by a 31 per cent contribution rate, the government provides matching contributions of 9 percent for informal workers. If scaled, this scheme could significantly expand old-age income security, said the World Bank.

"Bundling vocational training with job placement and life-skills services would improve returns to skill investment and help absorb returnee migrants more productively into the domestic labor market," it said.

Likewise, South Asia is the only region where government health spending as a share of GDP declined between 2000 and 2023, whereas household out-of-pocket spending is the highest of any region. Primary care, where chronic disease prevention and management are most effective, remains under-resourced. Less than a third of the primary health centres in Bangladesh and Nepal are equipped to deliver such services.

While South Asia’s working-age cohort (15–64) is currently at a historic high (68 per cent of the population) and will continue growing slightly in absolute size for another 10–15 years, but its share of the total population will hit a peak around 2034 and then begin to decline.

According to the report, countries like Bhutan and India are less than a decade away from their peak working-age shares, Bangladesh and Nepal will follow in the 2040s, while Sri Lanka’s share already peaked in 2005.

Although Nepal has a larger window for preparation than most of its South Asian neighbours, structural challenges are significant. "Remittances account for approximately 25 per cent of GDP and contributed to 40 per cent of poverty reduction between 2001 and 2011—yet returnee migrants lag non-migrants in salary for approximately three years after return, suggesting that migration has not yet translated into durable productivity gains at home," said the World Bank.

Nepali women work, on average, 9 hours per week less than men, reflecting persistent care burdens that constrain female labour force participation. Among workers aged 65 and older, approximately 91 percent are informally employed, leaving the vast majority of older Nepalis outside any contributory pension system. 

Published in The Rising Nepal on 4 November 2026.