The Story of the Failed Generational Contract in India

Challenges ahead for India

To attain sustainable growth over the long term a nation requires a stable macroeconomic economic and policy framework. It needs to identify the road blocks in its path to success and each individual, young or old needs to act responsibly and satisfy his part of the inter generational contract.

In recent years in India, there has been a growing preoccupation with the ‘intergenerational inequality‘. The Indian economy is no longer the one to look up to. Against a combination of structural and social constraints and a growth rate below everyone’s expectations, India has been negotiating extreme challenges, both on the internal and external front. After a rapid growth of 8.5% in the last decade, the Indian economy has experienced a downturn since the end of 2012. With the lack of effective authority and trust in the institutions, innovation and growth seem like a far-fetched dream. Thus, apart from the traditional ‘Twin Deficits’ the economy seems plagued with the loss of trust in the institutions in the country. Many people call it the deficit of trust in India.

erasing suspicion concept illustration

In any economy, trust facilitates diverse teams to hold together and add to each other’s work, helping achieve better results. Without trust businesses might not be able to achieve their potential outcomes. The Right Management and Tucker International Report says that “Leaders who bring high trust to multicultural organisations get superior results by clarifying expectations, listening first, creating transparency and practising accountability“. People around the world are doubtful about the safety of doing business with India. This cannot wholly be accounted to the macro-economic situation in the country. It is partly due to the lack of efficient administration and the prevalent social norms.

We cannot expect the intergenerational contract to continue to be fair as the current generation hands over to the next one an economy rigged with high deficits, which threaten our current resources, and poor management practices. We are looking at an economy where being late to meetings is acceptable, where giving a bribe in-order to get your work done is a norm and where it takes up-to 1420 days to settle a dispute. India’s regulatory framework doesn’t seem to be very supportive of new or existing businesses.. On an average starting a business in India takes twice as long as that in the OECD region. There are a plethora of regulations in the country which vary across states making business more sceptical of investing in the country.

India has experienced a shift in the social structure which has led to the redefinition of the traditional families. Modernization or rapid urbanization, the demographic transition, a desire for a new and better lifestyle and the spread of the Western culture in the country have promoted individualism rather than collectivism or familial behaviour. We are moving out of the close-knit joint family structure to nuclear families. There is a threat that the future generation may not act in the interest of their forefathers or kids.

Recommendations to revive the Contract

Against this background the intergenerational equity which specifies that the current generation must transfer what it has inherited to the next generation, in a reasonable condition, becomes a focus point. Can we transfer the same prosperous and healthy economy that we once inherited from our forefathers? In this respect, I foresee three major challenges that the country would have to face in the coming future in its aim to promote intergeneration equity.

First, India needs to meet two concerns with respect to the demographic dividend. First would be getting rid of the restrictive and inconsistent labour laws in order to create more jobs and the other would be to implement policy reforms to make the ‘young’ population more employable. To meet this challenge it will be essential to increase spending on vocational training as well as primary and secondary education, not to forget provisions for health and nutrition.


Second, the country has to face the consequences changing beliefs and values have lead to changes in the inter-generational relationships in all societies. As we move to a nuclear family set up, the emotional ties between family members weaken. The young generation has to take full responsibility of the old generation in a way that not only just meets their need but also provides them with the much needed social security. The future generation has to also make sure that they are not tempted by the new lifestyle options that have become common in the West, in terms of excessive drinking and illegal drug intake. These are not only a waste of productive time for the youth, but also are indicative of a luxury lifestyle which the country may not be able to afford given the scarcity of resources.


Third is the challenge of inefficient and unethical governance practices prevalent in the country. Poor governance has not only affected India’s business relations with the outside world but has also prevented many businessmen in the country to start new ventures. Many a times the larger states in the country do not have proper accessibility to funds and government schemes. The subsidies provided by the government, to promote the growth of certain sectors of the economy, don’t reach the desired recipients. A solution that I propose is to give in to the request for smaller states in order to make the governance more effective and to have all regions to have equal representation in the legislature. This will enable the money and government relief operations to penetrate deeper into various parts in the country allowing not only the present generations but also the future generation to reap the benefits of it.


As Harold L. Sheppard, former professor of gerontology, University of South Florida rightly said “Generations are not competitors for life’s satisfactions; they are partners in the search for well-being.”, there is a requirement for a new intergenerational contract that is based on mutual trust and an obligation for both the generations to work for each other’s betterment.


Jasmine Makkar Photo

Jasmine Makkar is a first year PGDM- Finance Student at SPJIMR. She has completed her graduation in Economics(H) from Lady Shri Ram College, DU. She enjoys writing, dancing and is a theatre enthusiast.

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Jasmine Makkar

Jasmine Makkar is a first year PGDM- Finance Student at SPJIMR. She has completed her graduation in Economics(H) from Lady Shri Ram College, DU. She enjoys writing, dancing and is a theatre enthusiast.