Will This Be the ‘Indian Century’? Four Key Questions

This is a turning point that the world has not seen for centuries, and will not see again for centuries.

India is on the cusp of surpassing China in population, according to the latest UN estimates. At 1.428 billion people, India has overtaken mainland China, data shows, and will soon surpass mainland China and Hong Kong combined.

With China’s population shrinking, the border between the two countries will only grow as India becomes the most populous country in history. What was once the world’s largest democracy is now, just that, the world’s largest.

China has taken advantage of its greatness to change the world more than any other nation over the past generation. Will India do the same in the next generation?

Sage India taking advantage of its size?

India’s growth curve is the envy of older countries like China, but its demographic future varies by region of the country.

There was a time when India and China wanted to curb the rate of population growth, by reducing the number of births. That era has long since receded.

The steepness of the demographic curve that led India to the first position seems encouraging for many developed countries that are rapidly aging. Indians are living longer, and the number of babies born each year has barely changed. Unlike China, which faced a decades-long hangover under the one-child policy, India did not face economic and social dangers. It has a young and growing workforce as a gray and contract China.

In some parts of India, the population is still growing too fast for the economy, producing more young people than there are jobs to fill. However, in other parts – especially in the more developed south, where women have more education and family planning programs have proven successful – the population has peaked. There, young families rarely produce more than two children.

The physical needs of nearly a billion and a half people put a terrible strain on India’s environment. But when the country was freed from the deepest poverty, it was no longer subject to famine. However, the future of the world’s largest workforce is leading some to hope that an “Indian century” will follow.

Will India get a “demographic dividend”?

Having a rapidly growing young workforce can be a huge opportunity – or a disaster.

India is a job ready country. More than two-thirds of all Indians are between the ages of 15 and 59. The ratio of children and pensioners in the country to working-age adults is extremely low.

But this opportunity comes with great challenges. That “demographic dividend” could easily turn into a disaster. In recent years, India has squeaked past China to claim the title of the fastest growing major economy. But it has never grown fast enough to generate enough formal employment for everyone. The country needs about nine million new jobs a year to keep going; annual shortfall helps relegate many to India’s old standby, agricultural work.

Most people in India do not have the means to be “unemployed” – in the labor force but without work. Underemployment is a more discrete danger. Wages have been stagnant for eight years, according to analysis by Jean Dreze, an economist at Delhi University. Economic growth without equal employment, creating an uneven Indian society, can increase the potential for unrest.

Can India get more women into the workforce?

Women work outside the home at lower rates in India than in almost any other country, a major barrier to economic expansion.

India has one of the world’s lowest rates of formal employment for women: about one in five. China is almost double that, higher than the United States and the world average. The economy cannot live up to its potential if it receives contributions from a few women.

Also worrisome, the rate has fallen in India even as the country’s overall economic situation has improved. The explanation favored by economists is that women do so much work that, if the family can do without additional income, wives stop working outside the home.

This does not mean that women in India do not work hard. They are visible in the 41 percent of the society that is still in agriculture, and almost all the household burden. But as long as these women remain outside the formal labor force, they cannot enter the most productive categories, in industry and services. Improving access to family planning, better education, efforts to change attitudes and social measures to ensure women’s safety can help more women do formal work.

Can India chart its path to prosperity?

India’s economic story will not be a repeat of China’s – which could give it an edge.

In the early 1990s, when China accelerated its market reforms, it roughly followed the template of others in East Asia – Japan, South Korea, Taiwan – and became a champion of export-driven manufacturing. It built an economy that is now more than five times the size of India.

Western countries are now rushing to embrace India as an alternative to China. But the obstacles that have kept India from pursuing similar programs for the past 30 years remain: ineffective governance, inadequate infrastructure, low spending on basic education and health, and laws that restrict land use and labor.

The “Make in India” program championed by Prime Minister Narendra Modi, now in its eighth year, has slowed down. Vietnam and Bangladesh have eaten up more work leaving Chinese factories as labor costs there have risen.

India’s economic story, however, is not likely to be a repeat of China’s. There are many ways for India to rise, especially with industrial manufacturing no longer playing the leading role in the world economy that it once did.

Services are now a big and exciting part of India’s economy, coupled with low-cost digital infrastructure that India itself is developing. Other glimmers are also developing: Chip manufacturers are looking to India as a high-end substitute for China; online services allow millions of young Indians to work abroad without leaving home; and even life in the Indian village is becoming more urbanized by the year.

The only certainty about the world’s largest country is that it is not what it used to be.