INDIA will have 2.9 million more people than China by the middle of this year and will become the world’s most populous country.
While this expands the human capital base, thereby, enhancing the productive capacities across economic sectors, it also adds urgency for effective education and health programmes, skilling initiatives, and job opportunities to ensure the productive use of human capital.
Despite the global turmoil as a result of the dual shocks emerging from Covid-19 and the UkraineRussia conflict, the long-term growth story of the Indian economy remains the only bright spot in the dismal global growth scenario.
This has helped attracting foreign investments in the country, with FDI inflow reaching an all-time high in 2021-22 at almost $85 billion.
Fifth-largest economy
India’s emergence as the world’s fifth-largest economy, overtaking the United Kingdom (UK) in 2022, marks the beginning of the ‘India era’ in the global growth story: It is set to surpass Japan and Germany to become the world’s third-largest economy by 2029.
There are many factors that could enable the Indian growth story. The most important of these is the fastageing of the population of China. The pandemic, the subsequent Ukraine-Russia conflict and the recent disastrous Covid-19 surge in China has undermined Beijing’s political and economic prowess in the Indo-Pacific and beyond, where India plays an active role.
The US-China trade war and the pandemic-induced supply chain disruptions emanating from China have paved the way for many western corporates to consider a China Plus One (C+1) strategy. This would entail diversifying investments from China to other countries, to mitigate the economic and geopolitical risks associated with the former. India could be the potential frontrunner in the C+1 game.
Comparative advantage
India enjoys a comparative demographic dividend over China. The low cost of labour and other forms of capital in the Indian markets gives the economy a distinctive advantage in bringing down production costs and hence making commodities more price-competitive in the international markets India has the potential to become a sizeable global player in electronics and semiconductor products as part of the C+1 diversification strategy.
India’s heavy investment in physical infrastructure through wholeof-Government exercises such as the National Infrastructure Pipeline (NIP) is anticipated to bring down costs in the manufacturing sector.
The Indian transport sector is also expected to grow and is slated to cut transportation time and costs by approximately 20 per cent.
India’s business climate
Recent policy interventions in encouraging the business climate in India have definitely helped India counter China in attracting investments to the domestic economy. All these, driven by the ‘Make in India’ initiative, has also been impelled by the process of promotion of the competitive federalism framework.
The Indian states are continuously bringing about reforms in their practices and are constantly evolving to reduce the transaction costs of doing business on the basis of the Business Reforms Action Plans (BRAP) parameters.
Riding on the digital uptick provided by the pandemic, India is well-placed to harness its high internet penetration at 43 per cent to convert digital skilling initiatives for returns on various economic sectors, especially services.
The prevalence of the English language skillset in the young Indian populace undoubtedly puts India ahead of China.
Indian diplomacy is indeed playing an extremely important role in responding to dynamism in the contemporary world order.
Unique opportunity
India’s assumption of the presidency of the G20 and the Shanghai Cooperation Organisation (SCO) this year has provided the nation with a unique opportunity to traverse the changing contours of globalisation while being one of the strongest voices for the Global South in recent times.
Also one needs to take into account the size of the domestic market in India, which is expected to grow faster that of China. The good news is not that India’s population has surpassed that of China’s but that India’s population growth is below the replacement fertility rate.
The replacement fertility rate is the average number of children a woman must have to keep the population steady and it is considered to be 2.1 children per woman.
According to Rachel Snow, the lead demographer of the UN Population Fund (UNFPA), this provides India with a rare window of opportunity. “You’ve got this big bulge of young people entering both reproductive years which means fertility will keep growing, but (also) entering the age of life for working,” she said.
The continued trajectory for India is that while the young population entering the reproductive phase will boost overall fertility, given the fertility pattern already evident, we can start to anticipate the decline, the plateauing and the decline.
