- With over 65% of India’s population under the age of 35, the country has considerable economic potential, provided that these young people receive the right education and skills;
- India’s infrastructure is still in its early stages of development and requires significant investment to compete on the global stage, unlike China, which already has a solid infrastructure;
- India’s democratic structure may limit its economic rise compared to China, which has benefited from a more effective centralized system.
In recent decades, China has established itself as an economic superpower, transforming the global economy and redefining the role of emerging economies on the international stage.
Now, with China’s growth slowing, many wonder whether India, the next largest emerging economy, will be able to follow a similar path and become the new driving force of the global economy.
While India has several advantages, such as favorable demographics and a strategic geopolitical position, there are many challenges and differences that make this comparison complex.
How Demographics and Population Growth Are India’s Advantage?
Demographics are often seen as one of India’s greatest assets. With a population that has surpassed 1.417 billion people, the country is on track to overtake China (1.412 billion) as the world’s most populous country – its population is expected to grow to 1.7 billion people by 2050.
While China’s population is beginning to age, with a negative growth rate from 2023 onwards, India still has a young population, with over 65% of its citizens under the age of 35. This creates a potentially vast workforce that could drive economic growth in the coming decades.
However, for this demographic advantage to translate into real economic growth, India needs to ensure that this young population is well-educated and skilled to work in productive sectors.
Currently, India’s education system still faces challenges, especially in terms of quality and access. For example, according to the United Nations Human Development Index (HDI), India ranks 134th out of 193 countries, demonstrating the gaps in education and healthcare.
Furthermore, the Indian labor market is still characterized by high informality. It is estimated that around 90% of India’s workforce is in the informal sector, where wages are low and job security is precarious.
To fully leverage the benefits of having a young population, India needs to create millions of jobs with good conditions, especially in areas such as manufacturing and technology.
So far, the country has struggled to create mass employment opportunities, and this is one of the main reasons why comparisons with China may be hasty.
What are the Advances and Limitations of Indian Infrastructure and Technology?
One area where China has excelled is in building a robust infrastructure and developing a powerful industrial base.
China has invested heavily in highways, high-speed rail, ports and airports, and has created special economic zones that have attracted foreign investment and boosted exports. Today, China is the world’s largest exporter, accounting for about 15 percent of global exports.
In contrast, India’s infrastructure is still developing. While the country has made significant progress in recent years, such as the “Make in India” program launched in 2014 to stimulate domestic production of goods, challenges remain.
The World Bank estimates that India will need to invest $4.5 trillion in infrastructure by 2040 to meet the needs of its economy. In addition, transportation and energy bottlenecks continue to pose obstacles. For example, frequent power outages still affect production in several parts of the country, which discourages new investment.
In addition, India has a smaller share of global trade compared to China. In 2022, India’s exports accounted for about 2% of global exports, a modest share compared to China’s.
This reflects India’s limited ability to compete on a global scale, especially in manufacturing sectors. India has excelled in the information technology (IT) sector, with its companies being world leaders in outsourcing services. However, the country has yet to achieve the same level of success in the production and export of physical products.
What are India’s Geopolitical Advantages and Challenges Compared to China and Vietnam?
Global geopolitics has played a crucial role in China’s rise. In the 1970s, the rapprochement between the United States and China amid the Cold War created favorable conditions for China to integrate into the global economy.
Western support was vital to China’s rise to become “the world’s factory.” Multinationals moved their operations to China to take advantage of the country’s cheap labor and favorable policies, which boosted the country’s economic growth.
Today, India finds itself in an interesting geopolitical position, as the rivalry between the United States and China is creating new opportunities for the country. Growing concern in the West about over-reliance on China has led to a strategy known as “China Plus One”, where companies seek to diversify their supply chains to include new countries such as India. As a result, companies such as Apple and Foxconn are investing in expanding their operations in India.
However, India faces strong competition from other Asian countries that are also positioning themselves as alternatives to China.
Countries such as Vietnam, Thailand and Malaysia have attracted a large part of foreign investment flowing out of China.
For example, Vietnam received over $36.6 billion in foreign direct investment (FDI) in 2023, compared to $28 billion in India, despite having a much smaller economy.
This shows that while India is in a good position, it still faces challenges in becoming Asia’s next major manufacturing hub.
Furthermore, the global environment today is much less conducive to trade and globalization than it was in the 1980s and 1990s, when China began its rise.
Trade tensions between the US and China, disputes over intellectual property, and growing distrust of global supply chains have created a more protectionist environment. This could make it harder for India to integrate into the global economy in the same way that China has.
How Does Democratic Governance Impact Economic Growth?
China has been ruled by a single party since the Communist Revolution of 1949. This system has allowed the Chinese government to implement rapid and coordinated economic reforms, often without the need for consultation or approval from different sections of society.
This centralization of power has been one of the factors that has enabled China to undertake large-scale economic changes, such as the creation of special economic zones and massive infrastructure construction, in a short period of time.
India, on the other hand, is the world’s largest democracy, with a complex and decentralized political structure. While this is a strength in terms of political inclusion and civil rights, it also makes it difficult to implement economic reforms.
India’s multi-party political system and heavy bureaucracy often result in slow and complex decision-making processes.
For example, the implementation of the Goods and Services Tax (GST), one of the most important tax reforms in India’s recent history, took years to complete and still faces implementation challenges.
Similarly, reforms to labour laws and land policies, which are essential for industrial development, often encounter political and social resistance.
Furthermore, corruption remains a serious problem in India. In 2023, the country ranked 93rd in Transparency International’s Corruption Perceptions Index, behind many of its Asian competitors.
As such, corruption not only undermines foreign investor confidence but also hinders domestic business development.
What are India’s Future Prospects vis-à-vis China?
India is undoubtedly in a strategic position to play a more prominent role in the global economy in the coming decades.
Its aforementioned young population, growing middle class and favorable geopolitical position are advantages that cannot be ignored. However, the comparison with China can be misleading.
While India may be on a promising growth path, the conditions that have enabled China to become an economic superpower are different from those that India faces today.
Globalization, which was a key driver of Chinese growth, is on the wane, replaced by protectionist policies and geopolitical tensions.
In addition, India’s underdeveloped infrastructure, complex governance, and domestic social and economic challenges are obstacles to its rise to superpower status.
If over the next few years the country can implement the necessary reforms, improve its infrastructure, create quality jobs, and maintain its position as a reliable strategic partner on the global stage, it could indeed play a more significant role in the global economy.
However, it is unlikely that India will replicate China’s path exactly. Instead, it will need to find its own development model, adapted to its reality and the current global context.