Over the last 10–15 years, the world has been preoccupied with the rise of China and its implications for the US–China relationship in the context of global leadership. China has already outperformed the US in several aspects, such as the number of patents registered. It is moving towards becoming a knowledge economy, and it is expected to become the world's largest economy in about 10 years.
After decades of India being known as a "sleeping beauty" in Asia, the country is now experiencing a period of intense economic development. In 2023, it is expected to have the world's fastest-growing economy at 6.8%. This growth is combined with continued population growth. India is currently the global leader with close to 1.5 billion people, and its population is expected to continue growing, making it a global power to be reckoned with in any scenario.
Despite a reduced population growth rate from 2.3% in 1972 to 0.97% in 2020, India still has one of the youngest populations worldwide, with 50% below 25 years of age and 65% below 35 years of age. A significant illustration of improved living conditions in the country is the impressive change achieved in life expectancy at birth, which has risen from 41 years in 1960 to 70.4 years in 2023.
Though demography is an important factor, India is strongly building its future global position on its economic transformation from an agricultural to an advanced, post-industrial economy. Currently, services contribute 54% to the gross value added (GVA), manufacturing contributes 20%, and agriculture contributes only 26%. These figures for the gross domestic product (GDP) are not significantly different, with services at 49%, manufacturing at 23%, and agriculture at 18%.
However, India faces a potential weakness in consolidating its international position due to the treatment of Muslim communities by Hindu-dominated governments in the country. This issue is being contested and raises objections to Prime Minister Narendra Modi's declared legacy of upholding the Indian tradition of democratic governance and respecting cultural and religious differences. If authorities at the federal and state levels fail to act in accordance with these principles, it could diminish India's potential for global respect.
According to Nicholas Kristof, "As India overtakes China as the most populous country in the world and as international companies seek new bases for manufacturing outside China, India has a historic opportunity to regain its mojo in a way that would change the world." Besides implementing full equality for Muslims and building a constructive and mutually respectful relationship between Hindus and Muslims, India faces three major challenges: it needs to improve education, boost women in the labor force, and improve the business climate to increase manufacturing and attract more foreign investors.
One gauge of the broader human capital challenge in India is that approximately 35% of children are suffering from malnutrition, which is higher than in many poorer African countries such as Somalia and Burkina Faso. China has thrived, in part, because it made significant investments in human capital by transforming its broken education system in the early 1980s, resulting in a literate and sizable workforce. In contrast, India falls far behind in this regard. While figures vary, it is estimated that only around 35% of Indian children make it to grades 11 and 12.
Women in labor
Only 23% of Indian women are currently engaged in employment, compared to 61% in China and 56% in the United States. Furthermore, female labor force participation in India has been declining for most of the past two decades. India needs to provide more opportunities for educated women to participate in the economy. The economic success stories of East Asian countries such as South Korea, Taiwan, China, Bangladesh, and Malaysia had different economic models, but one common factor was the emphasis on educating girls from rural areas and integrating these educated women into the urban labor force, which significantly expanded their countries' productivity.
In India, the share of manufacturing in the economy has remained stagnant, and there are numerous accounts from international executives highlighting the challenges of red tape and difficulties in doing business. However, the current situation presents a new opportunity for India to attract manufacturers. China is facing an aging population; its reputation has been marred by repression; and global companies are actively seeking alternative manufacturing bases. India, with its English-speaking population, familiar legal system, low-cost workforce, and highly skilled engineers graduating from institutions like the Indian Institutes of Technology, has the potential to capture this demand.
Arvind Subramanian, a former economic adviser to the Indian government and currently associated with Brown University, expresses skepticism about whether India will make enough policy changes to fully seize the opportunity presented by China's challenges. Nevertheless, he sees hope in Apple's efforts to manufacture iPhones in India, as this could serve as an encouraging example for other companies to follow suit.
Nicholas Kristof suggests that India has the potential to surprise the world once again by addressing key challenges. By bolstering education, empowering women to join the labor force, and attracting companies seeking new manufacturing bases, India can leverage its demographic advantage and tap into its vast potential. The country's young and dynamic workforce, combined with its English-speaking population, legal system, and engineering talent, can contribute to its success on the global stage. While both India and China have their own unique strengths and challenges, their trajectories and approaches to global leadership differ. India's focus on a knowledge-based economy and services, combined with efforts to address key social and economic issues, can position the country for significant growth and impact in the future.
On the other hand, India has also witnessed significant economic development, positioning itself as one of the fastest-growing major economies. With a diverse economy encompassing various sectors such as information technology, services, agriculture, and manufacturing, India has been able to leverage its demographic advantage and entrepreneurial spirit. The country has actively promoted foreign investments and implemented economic reforms to attract businesses and foster growth.
In terms of politics, both countries have distinct political systems. China follows a one-party system, with the Communist Party of China holding power, while India is the world's most populous democracy, characterized by a multi-party system. China's political landscape prioritizes stability and central control, while India's democracy allows for diverse opinions, political debates, and frequent elections.
India and China also have complex geopolitical dynamics, including border disputes and competition for regional influence. The two countries have periodically faced tensions and conflicts, particularly along their shared border in the Himalayan region. Despite their differences, both India and China play crucial roles in shaping global politics and economies. Their sheer size, economic potential, and geopolitical significance make them important actors on the world stage. The relationship between India and China is multifaceted, encompassing aspects of cooperation, competition, and occasional tensions, with implications that extend beyond their borders.
The latest estimates and projections from the United Nations indicate that China will soon lose its status as the world's most populous country. In April 2023, India's population is expected to reach 1,425,775,850 people, matching and eventually surpassing the population of mainland China. This projection suggests that India's population will continue to grow for several decades to come. On the other hand, China's population recently reached its peak and experienced a decline in 2022. Projections indicate that China's population will continue to decrease and may even drop below 1 billion by the end of the century.
Moreover, the number of older people is growing rapidly in both China and India. This growth is attributed to the increasing number of births in the middle of the last century, as those cohorts are now reaching older ages, and to declining mortality rates that enable more people to survive to advanced ages. Between 2023 and 2050, the number of individuals aged 65 or over is expected to nearly double in China and more than double in India, posing significant challenges to the capacity of healthcare and social care systems. Simultaneously, this significant aging of the population brings great potential for the "silver economy," which requires a suitable legal and fiscal/tax environment. This is a strong trend observed in many countries, including Asia, suggesting a high likelihood that both countries will prioritize their senior generations and contribute to the development of the "silver economy."
Many people still hold the impression of a poor and stagnant India, but in recent years, India has been rapidly progressing and is poised to become the third-largest global economy. This transformation has had significant internal impacts and has elevated India's position and active role in world affairs. The country's dynamism is evident in its remarkable export growth of 20% in 2022 compared to the previous year, reaching a total of $500 billion. As a result, India has become the primary trading partner for over 120 countries, underscoring its increasing importance in the global economy.
However, the next stage of progress depends largely on whether and to what extent the country will successfully address its three challenges: modernizing education, improving the position of women, and improving the functioning of the market by reducing red tape and bureaucratic burdens. While the first and third challenges are primarily matters of government policies and regulatory conditions, the second challenge also involves overcoming traditional attitudes towards women. The difficulty of this task can be illustrated by the fact that in EU countries, women are still paid on average about 20% less than men for the same job, and the representation of women in senior executive positions remains at 17%.
In the case of India, the rewards for successfully implementing changes in these domains are significant, providing additional motivation for the necessary efforts to be made by the government at all levels. This applies not only to the government but also to various actors in Indian society and business. Additionally, several countries in close proximity to India, such as South Korea, Singapore, Malaysia, and Indonesia, have demonstrated rapid and remarkable transformations, achieving exceptional performance. This serves as further inspiration for India's pursuit of change and progress.