India Is Passing China in Population. Can Its Economy Ever Do the Same?

India’s leaders rarely miss a chance to cheer the nation’s many distinctions, from its status as the world’s largest democracy to its new rank as the world’s fifth-largest economy, after recently surpassing Britain, its former colonial overlord. Even its turn this year as host of the Group of 20 summit is being celebrated as announcing India’s arrival on the global stage.

Now, another milestone is approaching, though with no fanfare from Indian officials. The country will soon pass China in population, knocking it from its perch for the first time in at least three centuries, data released by the United Nations on Wednesday shows.

With size — a population that now exceeds 1.4 billion people — comes geopolitical, economic and cultural power that India has long sought. And with growth comes the prospect of a “demographic dividend.” India has a work force that is young and expanding even as those in most industrialized countries, including China, are aging and in some cases shrinking.

But India’s immense size and lasting growth also lay bare its enormous challenges, renewing in this latest spotlight moment a perennial, if still uncomfortable, question: When will it ever fulfill its vast promise and become a power on the order of China or the United States?

“The young people have a great potential to contribute to the economy,” said Poonam Muttreja, the executive director of the Population Foundation of India. “But for them to do that requires the country to make investments in not just education but health, nutrition and skilling for employability.”

There also need to be jobs. That’s a longstanding deficiency for a top-heavy and at times gridlocked economy that must somehow produce 90 million new jobs before 2030, outside agriculture, to keep employment rates steady. Even in the years immediately before the pandemic, India was falling far short of that pace.

In China, a shrinking and aging population will make it harder to sustain economic growth and achieve its geopolitical ambitions to surpass the United States. But in previous decades, when it was still growing, it found its way to transformative growth through export-driven manufacturing, like smaller East Asian countries did before it.

India has yet to be able to replicate that formula or to come up with one of its own that can achieve more than incremental gains.

India’s infrastructure, while vastly improved from where it stood a few decades ago, remains far behind China’s, hindering foreign investment, which has stagnated in recent years. Another major problem is that only one in five Indian women are in the formal work force, among the lowest rates anywhere and one that has actually declined as India has gotten more prosperous. Apart from quashing the aspirations of the country’s hundreds of millions of young women, keeping them out of formal jobs acts as a terrible brake on the economy.

In terms of education, employment, digital access and various other parameters, girls and women do not have equal access to life-empowering tools and means as the boys and men have,” Ms. Muttreja said. “This needs to change for India to truly reap the demographic dividend.”

India’s economy has been growing much faster than its population for a generation, and the proportion of Indians living in extreme poverty has plummeted. Yet most Indians remain poor by global standards. To enter the top 10 percent by income, an Indian need make only about $300 a month. Famines are a thing of the past, but more than a third of all children are malnourished.

The country’s economic shortfalls, which have bred fierce competition even for the lowest-level jobs and stoked impatience among an aspirational Indian middle class, bring the risk of instability as dreams and realities diverge.

The rate of development across the huge country remains widely unequal, with some Indian states akin to middle-income nations and others struggling to provide the basics. The distribution of resources is increasingly becoming a tense political issue, testing India’s federal system.

When Gayathri Rajmurali, a local politician from the southern state of Tamil Nadu, found herself in India’s north for the first time this year, the disparity shocked her. “The north, they are behind 10 to 15 years to our places,” she said, pointing to indicators like basic infrastructure and average income.

And then there is the combustible environment created by the Hindu-first nationalism of Prime Minister Narendra Modi’s ruling party, as his support base has sped up a century-old campaign to reshape India’s pluralist democratic tradition and relegate Muslims and other minorities to second-class citizenship. Demographic numbers are part of the political provocation game, with right-wing leaders often falsely portraying India’s Muslim population of 200 million as rising sharply in proportion to the Hindu population as they call on Hindu families to have more children.

Mr. Modi and his lieutenants say India is heading in only one direction: Up. They point to the undeniable gains in a country that has quadrupled the size of its economy within a generation.

Among major economies, India’s is projected to be the fastest-growing this year, with the World Bank expecting it to expand 6.3 percent in the new fiscal year after a sharp downturn early in the pandemic. A rapid increase in public investment is still improving the country’s lagging infrastructure. It has multiple dazzling tech start-up scenes and a technologically savvy middle class, and its unique system of digital public goods is lifting up the marginalized. Its culture, from popular films to a rich tradition of music, will only grow in influence as it expands its reach to new audiences.

And now it has an enviable demographic profile, with people in their most economically productive years represented in the largest numbers. While China’s extended “one-child policy” has resulted in a steep decline in population that could put dire strain on its economy, similar extreme measures in India, like forced sterilization, were short-lived.

Instead, India addressed its fears of overpopulation and reduced the growth rate through more organic and gradual ways, including serious efforts to promote contraception and smaller families. As mass education has spread, especially among girls and women, the fertility rate has dipped to just above the level required to maintain the current population size.

And India is increasingly looking to capitalize on China’s economic and diplomatic difficulties to become a higher-end manufacturing alternative — it is now producing a small share of Apple’s iPhones — and a sought-after geopolitical partner and counterweight.

“India’s time has arrived,” Mr. Modi recently declared.

As India passes China in population — the new U.N. figures show that India has surpassed mainland China and will move past the mainland and Hong Kong combined next year — the two countries are estranged, in part over a series of clashes on their shared Himalayan border.

But not long ago, Mr. Modi saw China as a nation much like his own, striving to reclaim lost glory and a fairer place in the new world order, with lessons to offer about the pursuit of prosperity.

As a state and national leader, he has met with Xi Jinping, the Chinese leader, at least 18 times — they have shared fresh coconuts as well as a seat on a swing and many waterfront and garden strolls. Beyond Mr. Modi’s penchant for the strongman power that is typical of China’s one-party rule, analysts say the Indian leader was looking to Beijing for something more fundamental: solutions to the problems posed by a huge population.

The two nations share several historical parallels. The last time they traded places in population, in the 18th century or earlier, the Mughals ruled India and the Qing dynasty was expanding the borders of China; between them they were perhaps the richest empires that had ever existed. But as European powers went on to colonize most of the planet and then industrialized at home, the people of India and China became among the world’s poorest.

As recently as 1990, the two countries were still on essentially the same footing, with a roughly equal economic output per capita. Since then, China has shaken the world by creating more wealth than any other country in history. While India, too, has picked itself back up in the three decades since it liberalized its economy, it remains well behind in many of the most basic scales.

Today, China’s economy is roughly five times the size of India’s. The average citizen of China has an economic output of almost $13,000 a year, while the average Indian’s is less than $2,500. In human-development indicators, the contrast is even sharper, with infant mortality rates much higher in India, life expectancy lower and access to sanitation less prevalent.

The divergence, analysts say, comes down largely to China’s central consolidation of policy power, serious land reform, an earlier start in opening up its economy to market forces starting in the late 1970s, and its single-minded focus on export-led growth. China took the first-mover advantage and then compounded its dominance as it pursued its plans relentlessly.

India started opening its quasi-socialist economy nearly a decade later. Its approach remained piecemeal, constrained by tricky coalition politics and the competing interests of industrialists, unions, farmers and factions across its social spectrum.

“There is that element where China is a natural role model — not for its politics, but for the sheer efficiency,” said Jabin Jacob, a professor of international relations and governance studies at Shiv Nadar University near New Delhi.

The world now has a radically different power structure than it did in 1990. China has already made itself the world’s factory, all but closing off any path India could take to competitive dominance in export-driven manufacturing.

A “Make in India” campaign, inaugurated by Mr. Modi in 2014, has been stuttering ever since. Wage costs are lower in India than in China, but much of the work force is poorly educated, and the country has struggled to attract private investment with its restrictive labor laws and other impediments to business, including lingering protectionism.

To become as rich as China, economists say, India needs to either transform its development model radically — doing whatever it takes to become a center for globalized light manufacturing — or chart a path no other country has tried before.

Where India has found success is in the higher-value range of services. Companies like Tata Consultancy Services have become world leaders, while plenty of multinational firms like Goldman Sachs have more of their global staff working from India than anywhere else in the world.

But service-sector growth can go only so far in reaping India’s promise of a demographic dividend, or blunt the peril of an unemployment crisis. Hundreds of millions of people can’t find jobs or are underemployed in work that pays too little. In the state of Andhra Pradesh, for example, 35 percent of university graduates are estimated to be unemployed, unable to find work commensurate to their credentials.

Nowhere is the competition for jobs clearer than at the coaching centers that train young Indians for the employment entrance exams at government agencies. These jobs are still coveted as private sector work remains limited and less stable.

Dhananjay Kumar, who runs a coaching center in Bihar, India’s poorest state and its youngest, with a median age of 22, estimated that 650,000 students will apply for just 600 or 700 jobs in the national civil service this year. The civil service is a tiny part of the work force, but it is prestigious — in part because it comes with job security for life. Most applicants spend years, and a big chunk of their family’s savings, and still fail to make the cut.

Mr. Kumar’s own parents worked on a small farm and never learned to read or write. After excelling in school, he trained for the civil service exams but ended up landing work overseas, at Lloyds Bank in Britain, after learning computer coding along the way.

He sees the irony in his current business endeavor, training others for a line of work that did not pan out for himself.

“Here there is no enterprise, no companies,” Mr. Kumar said. For any young person, “the question comes, ‘What next? What can I do?’”

The lessons Mr. Modi is taking from China are most apparent in his push for infrastructure development, investing heavily in highways, railways and airports to improve supply chains and connectivity.

India has quintupled its annual spending on roads and railways during Mr. Modi’s nine years in power. In some weeks, he has been able to preside over ribbon cuttings at a new airport, a new highway and a new rail service.

But, analysts and critics say, what also drew him to Beijing was his aspiration for something approaching authoritarian power. Mr. Modi’s firm grip over the country’s democratic pillars at the expense of the opposition — highlighted by the recent ouster from Parliament of his most famous adversary, Rahul Gandhi — has pushed the country closer to a one-party state.

As Mr. Modi has boxed in opponents, cowed the press and overwhelmed independent elements of civil society, his government has lashed out at expressions of concern from abroad as evidence of a colonial plot to undermine India or a lack of understanding of India’s “civilizational” approach — both elements that diplomats had long heard in China’s own defensiveness.

All the while, the increasing militancy of his Hindu nationalist supporters, as arms of the state hang back and give perpetrators a free pass, exacerbates India’s religious fault lines and clashes that threaten to disrupt India’s rise.

The perpetual potential for conflagration was on display in recent weeks in episodes of violence across half a dozen states, particularly in West Bengal in the country’s east, as celebrations of the birthday of the Hindu deity Ram coincided with Ramadan.

Even as the state hosted events to celebrate India’s G20 presidency, violence there raged for days as Hindu and Muslim groups clashed, with the police shutting down the internet and carrying out marches to quell the clashes.

In Bihar, a third of those detained in connection with the violence were teenagers.

Shyam Saran, a former Indian foreign secretary, argued that India would in the end resist further centralization of power and remain democratic. That, he said, is the only way to keep India intact as a wildly diverse nation across languages, religions and caste distinctions.

“The very plurality of the country is like a safety valve,” he said.

As India’s democracy has eroded, Western powers have remained largely silent, prioritizing trade deals and courting India as a security ally. But deep down, diplomats say, there is a growing discomfort. Increasingly, many countries are drawing a distinction between engaging with India on issues such as trade and embracing India as a partner with shared values.

That could pose a problem for an India whose appeal as an alternative to China is in part a reflection of its position as the world’s largest democracy — a distinction that Mr. Modi lauds regularly even as he tightens his grip on power.

It is uncertain how much this moment, geopolitically and demographically, will turn into a lasting pivot toward India, bringing with it expanded economic opportunity for its vast work force.

Even as India tries to align its growing technological and economic capacity to capitalize on the Western tensions with China, it is determined to stick to its neutrality and maintain a balancing act between the United States and Russia. There is also the question of whether the West’s shift from China, the linchpin of the global economy, is a temporary recalibration or a more fundamental one.

In the end, Mr. Saran sees a tremendous opportunity.

“China took advantage of a favorable geopolitical moment to really transform itself by having access to technology, to capital, to markets led by the United States. It took advantage of that to build itself up,” Mr. Saran said. “This could be that moment for India.”

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