The SpaceX Polaris Dawn Spacewalk Holds Significance Beyond Indian Ties

Inflation in India has fallen below the central bank’s target rate of 4% for the second consecutive month. The European Central Bank reduced its policy rate by 0.25% last week, and the US Fed is widely anticipated to follow suit this week, during its meeting over Sep 17-18. Yet, RBI governor Shaktikanta Das has said that India should not rush to slash its policy rates, as considerations of financial stability have to be taken into account.

Governor Das is spot on. As rates come down in the US and Europe, billions of dollars would redeploy from asset class and geography, in search of higher risk-adjusted returns. Emerging market equity would be on destination. Foreign Portfolio Investors have already invested more than Rs 35,000 in Indian debt and equity in September so far. Well they might.

The success of the Bajaj Housing Finance IPO and LG’s plans for an Indian listing of a subsidiary, along with continuing inflows of India’s savings into mutual funds paint a rosy future for Indian stocks.

While we look up to follow India’s stock indices’ ascent to the skies, we might as well train our eyes a little higher, into the low earth orbit, defined as the space between an altitude of 2,000 km above mean sea level, and the Karman line, fuzzily fixed at some 100 km above mean sea level, conventionally accepted as the line that separates Earth’s atmosphere from space. Last week, Elon Musk’s space venture, SpaceX, launched a capsule into the low earth orbit. The capsule contained four astronauts in a new generation of space suits. Two of them stepped outside the capsule and went walkabout in space.

Indians should take note, for reasons more robust than the Indian connection of one of the four astronauts (Anna Menon, biomedical engineer and SpaceX employee, is married to NASA astronaut Anil Menon). This is the first space walk organised by a private company, and paves the way for more, and more sophisticated private activity in space. India has a budding private space industry, and it needs to be built up to do more than launch microsatellites.

The SpaceX space walk venture, the first of a series of Polaris missions, hoping to culminate in landing humans on Mars, was carried out seemingly without the official permission of the US government. The UN-sponsored Outer Space Treaty requires all space activity to be directly carried out by state agencies or, if by private agencies, under the supervision of state agencies.

Outer space constitutes equitable commons for all of humankind. If one nation decides to go about using it without regulation, it could lead to space debris, collisions and damage to other nations’ satellites. Rather than promote another arms race in anti-satellite weapons, the world, particularly its developing part, would benefit from coordination and cooperation in space activity.

A significant development last week was China’s decision to raise the retirement age in that country. Women retire at 50, if employed in manual work, and at 55, if doing office work. Men retire at 60. These age thresholds are now being raised, respectively, to 55, 58 and 63. The change will be phased in over several years, commending January 2025.

It has no direct bearing on India, but indirectly supports the concept of funded pensions, and against going back to the Old, unfunded Pension System, for which voters have shown a clear preference, rattling the newly elected government.

China illustrates the demographic transition, and what happens when the demographic dividend has been harvested, feasted on, and decrepitude sets in among those who made merry. China’s population has been declining for the last two years.

With generalised access to healthcare and social security, a decline in population comes not from the old dying off, but from fewer births, thanks to a declining total fertility rate (TFR), the average number of children a woman would have over her lifetime. Intuitively, if a woman has two children, the two would replace her and her partner when they die. So, the replacement rate would seem to be Two. But all children do not grow into adults who reproduce, so the TFR required to keep the population stable is a little higher, and is estimated to be 2.1.

TFR tends to fall with a rise in incomes, which is correlated with a fall in infant mortality, a rise in girls’ education and greater agency for women. Instead of allowing social development to bring its TFR down, China implemented a vigorous one-child policy and forced the pace of deceleration of population growth. As a result, its population has started to decline, before its society has become rich. By 1935, it is estimated that 30% of Chinese would be above 60 years of age. If they do not work and earn, their upkeep would have to be financed from the output of younger cohorts who work, generate incomes and pay taxes.

There is a misperception that if everyone saves while they work, their old age will be taken care of. Financial savings get you financial assets. For the financial assets to generate returns large enough to earn a comfortable pension, the income to which the financial instruments create a claim would have to be large enough. That income – whether dividends on equity, interest on private debt or interest on government debt – comes, ultimately, out of society’s output. If there are not enough people to produce that output that generates income and pays taxes, having financial instruments would be of little avail. Unless, of course, the financial instruments lay claim to production in other countries with lots of working-age people and high levels of productivity and production.

Young people are considered important not just because they work and earn. They tend to be more entrepreneurial, more prone to innovation and creating new advances in science and technology.

Raising the retirement age will increase the number of people in the workforce, and reduce the number of people who have to be supported. But it would not stem the decline in the share of the young in the population. Hence the Chinese attempt to persuade people to have two, or even three, children.

The horrors of a rising population pale when compared to the horrors of a declining population. China has not done raising its retirement age.