Based on their calculations, the United Nations recently informed the world that India had surpassed China in terms of population- a milestone that would add to the dimension of their image in socio-economic terms. Demographic analyst Poonam Muttreja, Executive Director, Population Foundation of India subsequently observed in Al Jazeera recently that half a century ago, India and China stood at a similar point. Their fertility rates – at 5.6 and 5.5 children per woman – were neck and neck and way more than what is regarded as replacement level fertility of 2.1, at which the population stabilizes. It was also underlined that this evolving scenario was partially due to both countries having faced similar social and developmental challenges as they sought to build their nations after suffering the devastation of long colonial and imperial humiliations and war.
P. Muttreja has noted in this context that India has been following its own family planning programme since 1952 and chose to travel on a path that was slow, steady and winding. It provided reproductive health services, choices for couples on contraception and the freedom to decide how many children they wanted.
This strategy was not an obvious success immediately. The population growth rate increased initially, from 21.6 percent in 1961 to 24.8 percent in 1971, and the population rose from 439 million to 548 million, largely as the result of increased life expectancy — up from 45 to 49 years in that decade. Such a rise in numbers however caused frustration and led to the then-Prime Minister Indira Gandhi imposing a state of national emergency from 1975 to 1977 and suspending many civil liberties. India subsequently returned to its old path and focused on the provision of reproductive health and family planning services as the means to a stable population. Under India’s federal structure, state governments set their own priorities with southern states like Kerala and Tamil Nadu emphasizing socioeconomic development and women’s empowerment.
CNN has reflected on the changing scenario and made some interesting observations. Like other analysts they have noted that the world will carefully monitor India’s new status and monitor as to whether its economy will be able to harness necessary demographic strength to displace China within the international economic
paradigm.
This new scenario pertaining to India and investing in a nation of 1.4 billion, will in all probability face recent geopolitical shifts. In this context it has been underlined that as Western leaders look to boost economic cooperation with countries that share similar values, India, the world’s largest democracy, will stand to gain.
According to Partha Sen, Professor Emeritus at the Delhi School of Economics, as tensions continue to flare between the West and Beijing, in all likelihood there will be “a move to diversify away, and India will fit right into it.” India’s “demographic dividend” -the potential economic growth arising from a large working-age population- will represent a major opportunity. Its vast consumer market and pool of affordable labor will also draw more attention from global brands and trading partners.
It would be important at this point to draw attention to a course of anticipatory action that has already been undertaken by India. In a bid to boost the industrial sector and lift exports, the Indian government has sought to sign free trade deals, a move that’s been warmly received around the world. Since 2021, India has struck agreements with Australia, the United Arab Emirates and Mauritius. It is also negotiating deals with the European Union, the United Kingdom and Canada.
Russia, whose trade with the West has dropped since its intrusion into Ukraine has also shown interest in increasing ties with India. Shilan Shah, deputy chief emerging markets economist for Capital Economics has however observed that responding to such a move towards Moscow would require a balancing act for New Delhi viz-a-viz Washington.
The United States and India have taken steps in recent months to strengthen their ties, particularly in defense and technology, as they attempt to counter the rise of an increasingly assertive China. Since January of this year Washington has been facilitating a closer partnership with India to help create a platform pertaining to artificial intelligence, military equipment and semiconductors. Such a move has also been touted by the United States as a process that would reinforce bilateral “democratic values and democratic institutions.” In February an agreement was also reached between the two countries whereby Air India bought nearly 200 aircraft from Boeing, an American plane maker. US President Joe Biden hailed this as an example of “the strength of the US-India economic partnership.”
Analysts have however been going beyond geopolitics. They feel that the United States, driven by business interest, is currently taking different steps because of India’s economic and demographic fundamentals.
The International Monetary Fund is now considering that India will outperform all major emerging and advanced economies this year, logging GDP growth of 5.9%. By comparison, the German and UK economies will stagnate, while that of the United States will grow by only 1.6%.
It has in fact been suggested by the Centre for Economics and Business Research that the current evolving scenario and the demographic growth in India could facilitate a situation where India might be able to overtake Germany as the world’s fourth largest economy in 2026 and also overtake Japan, presently in the number three spot by 2032.
These assumptions are emerging due to the belief that over the next year India’s working-age population will stand at more than 900 million. Such a belief is emerging on the basis of 2021 data released by the Organisation for Economic Cooperation and Development. In fact Capital Economics feels that sooner than later, India’s workforce could be bigger than China’s.
It appears that the Biden Administration has embraced India’s expected growth with unconcealed enthusiasm. Donald Lu, the US Assistant Secretary of State for South and Central Asian Affairs has in fact mentioned recently to the Indian news agency PTI that “we want to be part of your economic miracle.”
Some economists have however refrained from being overly enthusiastic over immediate fallouts because of the demographic dividend. Kaushik Basu, an economics professor at Cornell University has observed that at 7.1%, India’s unemployment rate remains above its pre-pandemic average and this may be exacerbated as the population grows.
This has led a few analysts to suggest that India can have only one way out of this awkward matrix. India will have to focus on building more factories, diverse in nature. Such units within the manufacturing sector will also have to be globally competitive and labor-intensive. Such an approach has been advocated because many international companies are scouting for new production hubs.
Such a scenario has already started to emerge in India. It may be noted that Apple has increased its activity significantly in India after suffering supply chain snags in mainland China. It appears that they will increase their investment further across India. Another example has been the recent visit to India of the chief of Foxconn who came and met Prime Minister Modi. The Taiwanese electronics maker, which supplies to Apple, at present is one of the fastest-growing manufacturers in India and is looking to expand. Economist De Silva has remarked that “Apple increasing production and investment in India has certainly raised hopes of forming an electronics ecosystem in the country and more broadly encouraging other multinationals as well.”
Nevertheless, India has an unfinished agenda. As its population continues to grow, its large young population available to work and accelerate the country’s economic progress, needs to be educated and trained to do so. India needs to make sure that it adapts its education and professional skills programmes to meet the needs of the job market. In the success of its youth lies India’s success. India must also work towards leveraging its gender dividend for increase in economic growth. Demographic analysts have observed that this starts with investing more in education beyond primary school, especially for women.
India also needs to understand that its youth bulge is a double-edged sword. To gain from it, India will need to create enough jobs for the millions who enter its workforce every year. At fist glance it might appear to be a difficult challenge. However that can also be overcome if India attracts greater global investments. India needs to remember that the window of opportunity is shrinking, and unless it moves quickly, its demographic dividend could easily turn into an unemployment nightmare.
One needs to conclude by also referring to another facet within the emerging paradigm. Alexandra Hermann, a lead economist at Oxford Economics has correctly warned that India will also need to review its prevailing stringent labor laws, high import duties and logistics. These are challenges that might discourage prospective investors. In this context it has been pointed out by the World bank that despite improvements in infrastructure, India’s logistics costs are still higher than in China, South Korea, Japan, Malaysia and Thailand. As such if India wants to gain from its demographic dividend, they need to become more attractive as a destination for other foreign investors.
Muhammad Zamir, a former Ambassador, is an analyst specialized in foreign affairs, right to information and good governance
