What to watch for after India overtakes China as most-populous nation

The challenge for India, which is estimated to grow 7% in the year ending March, is to sustain that pace of expansion in the coming decades or end up with even higher unemployment rates

As India overtakes China as the world’s most-populous nation, an array of demographic issues such as birth rates and labor markets are emerging as key themes to watch out for in the two Asian powerhouses.

India, with its predominantly young population, is on course to being the fastest-growing major economy in the coming years, while an aging China is expected to see slower growth after years of rapid expansion.

Here are five charts to show why demographics matter in this historic shift:

 

China, whose strict one-child policy until 2016 kept birth rates in check, will see its working-age population shrink over the century as people grow older and eventually make up more than 40 per cent of its population. This compares to India where people aged 65 years and above will account for less than a third of the total 2.3 billion people projected by 2100.

 

That’s not to say everything looks rosy for India. Half of its population is under the age of 30, and some 12 or so million people enter the market every year looking for jobs. The challenge for India, which is estimated to grow 7 per cent in the year ending March, is to sustain that pace of expansion in the coming decades or end up with even higher unemployment rates.

 

While India talks up its demographic dividend, a key number that escapes the headlines is the participation of women in the workforce. Women account for just a fifth of the total labor force, only slightly better than the rate of Afghanistan. Women in China, on the other, make up 44.8 per cent of the workforce. 

 

India’s middle-class population pales in comparison to China’s, but the country’s relatively cheap labor makes it an attractive destination for businesses looking to move away from China. Apple Inc. began assembling its latest iPhone models in the South Asian nation, in a win for Prime Minister Narendra Modi’s ‘Make in India’ campaign. But there were others like General Motors Co. and Harley Davidson Inc. that have quit, frustrating Modi’s goal of boosting manufacturing’s share of the economy to 25 per cent from the current 14 per cent.

 

India’s population remains largely rural, unlike China’s. Even as both countries are seeing workers migrate to megacities seeking better prospects, the majority of India’s people will remain in the hinterland, while the bulk of China will increasingly be urban by 2035, according to estimates from UN-Habitat.

That’s a reminder of the challenges the South Asian country faces in alleviating poverty and reducing inequality.