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Why had India fallen behind China? Is it poised to catch up?

India has a lot of ground to make up. On the other hand China is about to suffer a severe demographic crisis (too many elderly and too few young workers) which will stifle it's eventual growth and lead to its population and propsects falling like a rock over time.


We look at India’s looming status as the world’s most populous country and also give you the latest on the Fox News settlement.


By David Leonhardt, NY Times

4/19/23


The United Nations released data this morning confirming that India will soon surpass China as the most populous country. When that happens, it will be the first time in centuries that China does not have the world’s largest population.


The milestone is focusing attention on both India’s potential to become a global power and the significant challenges that it faces. My Times colleagues who are based in India will be writing about the subject frequently this year, and I want to use today’s newsletter to frame these issues.


China’s economic and geopolitical rise over the past few decades has changed the world. If India can use its size — and China’s declining population — to catch up, the world would change again.


The first Apple store

China today is vastly richer than India, but that is a relatively recent phenomenon.


In the late 1970s, India was more affluent (based on the most telling measure, economic output per person). Since then, the two countries have followed very different paths:




Source: World Bank | Data is in current U.S. dollars. | By The New York Times

What happened after the late 1970s? Under Deng Xiaoping, its ruler at the time, China began to open its economy to market forces and foreign investment. It moved away from the inefficiencies of state-run communism.


But the government did so in a measured way, rather than fully embracing laissez-faire capitalism. China maintained trade protections that helped its companies grow: In exchange for allowing foreign companies to build factories, China restricted those companies’ ability to sell goods in China and required them to share technology with local companies. This mix of market capitalism and government regulation was the same one that other countries — including the United States, long ago — have used to industrialize.


The strategy worked phenomenally well. Hundreds of millions of Chinese citizens moved from poor, rural areas to take factory jobs in cities. The resulting decline in poverty may be the largest in human history.


India was never a communist country, but it did have a weak socialist-style economy in the 1970s suffering the aftereffects of British colonialism. And India was slower to modernize than China, as my colleagues Mujib Mashal and Alex Travelli — both based in Delhi — point out in a new story about the population milestone.


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


India’s lag allowed China to grab a first-mover advantage. By the 1990s, China’s manufacturing sector was developed enough to be much more efficient than India’s. Even though wages were somewhat lower in India, many foreign companies chose to locate in China.


One factor was the Chinese government’s aggressive investments in roads, airports, rail networks and other infrastructure. Today, transit in China is often more advanced than in the United States. Transportation in India tends to be less convenient.


India’s recent leaders, including Narendra Modi, the current prime minister, have absorbed this lesson and tried to catch up, spending large sums on infrastructure. They have made significant progress even though China remains far ahead, Mujib and Alex explain. “India’s time has arrived,” Modi recently said.


India’s gender gap

A second factor is education. China’s population has long been more educated than India’s, with higher literacy rates and larger shares of people completing grade school, high school and college. Education was one of the few economic successes of the brutal Mao Zedong era, from the late 1940s through mid-1970s. And educated people make for more productive workers, in both white-collar and blue-collar jobs, research has shown.


Importantly, the Communist Party’s focus on learning included both girls and boys. India, by contrast, has large gender gaps in literacy and educational attainment.




These gaps contribute to employment gaps between men and women. Only about one-fifth of Indian women work in a formal job. “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,” Poonam Muttreja, the executive director of the Population Foundation of India, a research group, told The Times. “This needs to change for India to truly reap the demographic dividend.”


The “demographic dividend” is a reference to recent population trends in India: The country’s largest age group is people in the prime of their working lives. China’s population is aging rapidly, because of its longtime one-child policy, and declined last year for the first time since the 1960s (when Mao’s policies caused a famine). The World Bank projects China’s working-age population to fall to 600 million by 2050 and India’s to rise to 800 million.


The demographic dividend gives India a chance to expand both its economy and its global influence. One big question is whether it can do so (as these charts show). A second question is what kind of country it will be.


Indian leaders are proud of their country’s status as the world’s largest democracy, and India’s relations with the United States are better than with China. In the continuing global competition between democracies and autocracies, India could be a key player.


But it’s still not clear exactly which side it will be on. I recommend reading the story by Mujib and Alex, which points out Modi’s continuing crackdown on dissent and embrace of strongman tactics.

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