India, first demographic power in search of an economic miracle

First modification: 04/20/2023 – 11:41

A large population means a large market and a large workforce. This is good for the economy, as long as it continues to grow to ensure a decent income for all residents. The two gigantic neighbors and rivals, India and China, have always viewed their overabundant population as a handicap.

But being the most populous country in the world has not prevented China from becoming the second world economy in forty years. The desire to satisfy everyone’s needs has even been a spur to its fabulous progress. India has not been able to keep up with him. In the 1990s, its GDP per capita was equivalent. Today, China’s is $13,000. India’s is five times less, only $2,500.

Will India be able to catch up?

Last year, India’s economy overtook the UK’s to become fifth in the world. It has registered strong growth in 2022, around 8%, and expects another 7% this year. Therefore, it has found a new impetus. The trade war between China and the United States benefits him. Of course, Apple is going to open a store and a factory in India.

However, there will be no Indian miracle. To reach China’s level of wealth in 2023, it would need to grow 10% for almost 20 years straight. An unimaginable feat in today’s business environment.

Modernize

India needs to modernize to attract more foreign investment and find a new model, since the role of the world’s top power plant is already occupied by China, which has developed a competitive advantage that makes it difficult to achieve. Since Narendra Modi came to power, roads, highways and airports have sprung up like mushrooms. But this is not enough to convince investors.

Logistics remain inadequate, inferior to China’s, Indian labor is cheaper but clearly less productive than in China, and prevailing protectionism turns investors back. As a consequence, India is not creating enough jobs for its youth. The unemployment rate is 40% among those under 25 years of age. This is not new, but the problem will get even worse, since those under 25 years of age represent almost half of the population.

Relative demographic advantage

Having a young and educated population is an advantage envied by all industrialized countries, including China, which are faced with a declining workforce. But when this age group does not enter the workforce, this advantage can become a calamity, a source of inequality, frustration and social unrest.

India’s underemployment is not just economic. Only two in ten women work in India, compared to six in ten in China. The jobs offered to them are poorly paid, so they prefer to stay at home. But most women don’t even have this option. It is under pressure from their husbands that they give up work. However, female employment is one of the keys to growth, and this is true all over the world.