There were mixed feelings when news came that India had gone past China’s population of 1,425 million. Of late, there has been creeping self-doubt, even in official policy circles, whether the much-vaunted “demographic dividend” would play out the way one had imagined.
In an ideal scenario, a growing young and educated working population should be a big advantage for any economy. A growing middle class consuming market also becomes attractive for the rest of the world in terms of trade and investment interaction. After all, two-thirds of India‘s population is under 35 years of age. And this advantage for India should continue for at least a decade after China’s population starts shrinking.
But this advantage can be leveraged only if certain conditions are fulfilled. One unfulfilled condition, which policymakers unanimously lament, is the grossly inadequate education and healthcare infrastructure to help create a workforce which reaps the so-called demographic dividend. There is enough literature analysing threadbare why India has not been able to fix its education and healthcare infrastructure, especially in the populous Hindi heartland states, which are decades behind even their south Indian counterparts – not to talk of any other country – in providing quality healthcare and education.
Remember, much of the so-called “demographic dividend” is supposed to accrue from these populous Hindi-speaking north and central Indian states. The southern states have begun mirroring the developed world in demographics, according to World Bank studies.
So the notion of demographic dividend is rather complex in the Indian situation and presents huge challenges. In this context, Chinese foreign ministry spokesperson Wang Wenbin echoed what many Indian policymakers have been saying for some time – an educated workforce is the key. Speaking about China, Wang said: “When assessing a country’s demographic dividend, we need to look at not just its size but also its quality. Size matters, but what matters more is talent resources. Nearly 900 million of the 1.4 billion Chinese are of working age and on average have received 10.9 years of education.”
China has managed to create a much larger educated and healthy work force than India. This clearly reflects in the sheer size of the consuming middle class in China compared with India.
Photo: diego.aviles/Flickr (CC BY-NC 2.0)
The US-based Pew Survey puts the Chinese middle and upper middle income population living on $10 to $50 a day at nearly 800 million in 2021. China achieved this in 40 years after the Deng Xiaoping reforms began.
In sharp contrast, Pew puts India’s middle and upper middle income population at merely 121 million. So, China’s middle and upper middle consuming class is over seven times that of India‘s. This ratio is directly reflected in the number of passenger cars sold in China and India in 2022. India sold 3.7 million passenger cars and China 26 million in the same year – over seven times. China’s GDP at nearly $18 trillion is six times that of India’s.
China’s economically empowered middle class is way bigger than India’s. India, too, has experienced rapid growth over 30 years of economic reforms, launched in 1991, but remains at the bottom 25% of economies in terms of per capita income.
In fact, the biggest bulge shown by the Pew Survey is in India’s low-income population living on $2 to $10 a day. About 1.19 billion people live on $2 to $10 in India. This is the relatively low-income trap, mainly a result of 55% of the population remaining engaged in agriculture-related activities.
The last nine years have actually seen a backsliding as large numbers of people have moved back from urban employment to agriculture-related work, especially after the pandemic. This shows up in the permanently higher demand for the guaranteed rural employment programme. Moreover, reputed development economist Jean Dreze recently wrote in the Indian Express showing evidence gleaned from official labour surveys that rural wages have stagnated for many years. It is in this context that India crossing China’s population causes a sense of unease.
This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been republished here. To subscribe to The India Cable, click here.
