The Looming Gap: Today's Youth May Be Financially Worse Off

Beneath the dazzling fireworks of India's economic boom, a flicker of doubt dances in the shadows. Will the generation propelling this vibrant surge inherit a diminished echo of prosperity? This isn't an alarmist's cry, but a sobering reality painted by shifting landscapes, rising burdens, and the silent erosion of a once-certain upward mobility.

Imagine a tapestry woven with the golden threads of India's growth: soaring stock markets, bustling IT hubs, layers and expansive infrastructure and the entrepreneurial spirit igniting new ventures. Yet, embedded within this fabric are darker strands – the spiralling cost of education and healthcare, the shifting employment landscape, and the ever-escalating price tags on life's necessities like housing, food, utilities, and communication etc.

These strands threaten to unravel the promise of a brighter future for the very youth driving this progress. The Indian Dream that once beckoned – owning a home, securing a comfortable retirement – seems a distant mirage.

*Education: The Escalator Ascending – and Then Vanishing

Education, once the great equaliser, and passport to upward mobility, now sits atop a vertiginous escalator. Its price tag rockets skyward, leaving young adults saddled with crippling debt before they even step into the job market.

Soaring educational expenses create insurmountable debt for young adults entering the workforce, exacerbating socioeconomic divides. Most households break the bank or mortgage to pay for professional courses. The exorbitant price tag renders higher education unattainable for most working families, resulting in the ‘exclusion’ of youth from the system. This crisis resonates across campuses and cities, spotlighting the transformation of education into a debt trap rather than a pathway to prosperity. Education is a costly pursuit.

This underlines a very disturbing trend. Education and health expenses impose an unbearable burden on most families. Parents are compelled to make agonising choices, often sacrificing savings or taking on debt to secure their children's academic success.

The Job Market Maze: Where Security is a Mirage

Gone are the days of predictable, high-paying jobs. The landscape has morphed into a labyrinth of gig economies, precarity, and automation. While skills remain crucial, job security feels ever more elusive, making long-term financial planning as precarious as balancing on a tightrope.

The Crux study unveils a harsh reality for Indian millennials, witnessing a median wealth decline of 15 per cent compared to their parents. The vision of a secure future diminishes as the widening gap between costs and earnings takes centre stage. Despite investing in higher education, millennials struggle to match their parents' wealth accumulation. For instance, engineers pay Rs 20 lakhs for graduation from a top private institution, taking three years to realise the investment. Those from lower-tier colleges pay Rs 9 lakhs, but only a quarter secure 'regular' jobs, a third work in the unorganised sector with no security or benefits, earning below the per capita income. The 'payback' time for investment recovery is five years, leaving the rest unemployed, resulting in a negative rate of return (ROI) and numerous intangible costs for the 'educated but unemployed.'

*The Cost-of-Living Conundrum: A Mountain Out of a Molehill

Housing, education, and healthcare – the very pillars of a secure life – are inflating faster than incomes. This leaves even diligent savers gasping for air as they strive to reach key milestones. Owning a home, once a rite of passage, transforms into a monumental feat. According to the Crux study median housing prices have trebled in the past decade, outpacing income growth by a factor of two. Only double-income families can afford to buy a dwelling in India’s top eight cities.

The Home Purchase Affordability Index (HPAI), a measure of a household's ability to qualify for a housing loan, paints a grim picture: the EMI to income ratio has risen from 40 per cent to a staggering 65 per cent, leaving even double-income families struggling to keep pace.

Similarly, the cost of healthcare is galloping and is perhaps the most insidious threat to middle-class stability. The Crux study highlights the alarming trend: a majority of middle-class households are left debt-ridden, their saving wiped out in the aftermath of a family member's hospitalisation.

The relentless rise in living costs looms over every aspect of life, from groceries to transportation to utilities. Even those with stable careers find their purchasing power diminishing year after year. The dream of a secure future, once within reach, now feels like a distant mirage, as the gap between aspirations and reality widens.

The Savings Shortfall: Delayed Gratification in a World of Instant Wants

With instant gratification woven into the fabric of modern life, the allure of easy credit and tempting consumer choices often eclipses the discipline of delayed gratification. The culture of "buy now, pay later" eats into saving rates, jeopardising the long-term wealth-building process. Data from the World Bank indicates that India's household saving rate has slipped below 20 per cent, reflecting the ease with which credit is available and the pressure from a consumer-driven culture. The temptation to splurge on the latest gadgets or trendy clothes overshadows the wisdom of building a financial cushion for the future.

But this isn't a preordained script. Encouraging innovation and nurturing startups can unlock new avenues for wealth creation and job opportunities. Policy changes can be our shield against rising costs. Subsidised education, affordable and holistic healthcare, economical housing, and accessible credit solutions can ease the financial burden on young adults. Picture a world where student loans are manageable, home ownership achievable, and healthcare less daunting.

Similarly, a robust social security system and flexible retirement options can offer financial security for future generations. Retirement should not be a cliff edge but a gentle slope, allowing individuals to age gracefully without economic anxieties.

The future isn't set in stone. By acknowledging the challenges, embracing responsible economic practices, and investing in policies that empower the youth, India can rewrite the script of the inheritance gap. 

Vikas Singh

Guest Author The author is Managing Director at Pearson India.