India’s Population Is Its Greatest Economic Opportunity

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By Alex Williams 

No modern state has ever been so mystified by its own immensity as India. Its 1.3 million square miles, its 1.4 billion inhabitants, its megadiverse environment and society, and its multi-trillion dollar economy all indicate a potential power that Delhi has yet to fully register. While the Mauryans, Mughals, and Marathas rose and ebbed in their control of the subcontinent, India evaded a stable unification until after independence from the British Empire in 1947. The former Raj was chaotically partitioned into a majority-Hindu and majority-Muslim successor states. The Hindu state, of course, became India and inherited the vast majorities of population, landmass, and economic output. Its capital Delhi promptly initiated the process of establishing the machinery of modern nationalism, incorporating the surviving princely states into the fledgling Republic. A new secular, stable democracy was born, cementing the formation of a second Asian giant. 

The first Asian giant, of course, was always China. Where India was unified fleetingly and inconsistently, China was united by successive dynasties spanning centuries. Where India is comprised of thousands of sizable ethnicities, China witnessed the emergence of a unified identity during the Han Dynasty 2,000 years ago, which today accounts for over 90% of the population. Where India was conceived as a multi-party representative democracy, its unitary neighbor is under the single-party command of the Chinese Communist Party. More recently, China has replicated the economic miracle of the Asian Tigers, sustaining a rapid modernization and productive expansion that saw total GDP surpass that of the Germans and Japanese by 2010 and swiftly approach America for first place. 

By this year of the twenty-first century, the world at large has finally understood the extent and implications of the Chinese ascent. This new attention, however, has marginalized the equally vast potential of the second Asian giant – one that the millennia-old global power dynamics have yet to contemplate as a unified force. No matter China’s present economic lead, nor the benefits of a ruthlessly efficient state apparatus or its homogeneity-enforced social cohesion, the destiny of India contains a superior element: a population soon to be first in the world.

The power of a nation mainly depends upon its relative economic potential. When the fumes of this potential are exhausted, the nation cannot sustain itself against its rivals, as the Soviet Union discovered when its command economy began to suffocate in the late twentieth century. A nation’s period of regional hegemony coincides with its economic paramountcy, and the size of its economy is constrained by population size. China preserved its economic domination of Asia via a population that consistently ranged between 20% and 25% of the global total.

When a nation’s economy fully develops, as with Japan and Germany, its total economic volume becomes consistent with the relative size of its population. Thus, Japan’s economy remains roughly a third larger than Germany so long as its population too remains a third larger. India’s population is poised to surpass that of China by the end of the present decade; when that day comes, the potential scale of its fully developed economy will also eclipse China. When India assumes the mantle of the world’s most populous country, it will be capable of supporting the world’s largest economy, and subsequently become the most powerful kingmaker of global history to come.

China can depend upon its economic supremacy so long as its population is second to none. In this regard, it safely quadruples the size of the third largest population, America. Yet while America’s yearly growth rate inconsequentially exceeds China’s, India’s population continues to grow at nearly three times China’s rate, closing a demographic gap with every passing year. The origin of this disparity resides in consequential events of the 1970s, notably the one-child policy that has since attracted infamy even within party circles. The 1979 diktat, which followed earlier family planning initiatives, is insisted by the CCP to have prevented 400 million births; however, this number likely belies the already dramatic reductions in the birth rate since 1970. 

The policy no doubt accelerated a fertility decline already driven by rapid urbanization. Combined with the one-child edict, it slashed China’s annual population growth rate from 2.5% in the late 1960s to under 1% by 1995. The reversal of the one-child policy throughout the 2010s did little to induce a highly urban Chinese population to adjust its reproductive behavior. As a result, China’s stagnating population growth will initiate a population decline as soon as 2030. By 2025, its status as the world’s most populous state will be imperiled.

India’s story differs profoundly. Firstly, no draconian baby limitation could logistically or constitutionally be enforced by its newly-established, parliamentary system. Economically, India’s development was slower than in East Asia and so encouraged a slower urbanization rate. Thus, the stable decline of its fertility rate was far more gradual than China’s volatile plunges; since 1970, fertility has outpaced China’s. This critical, if inconspicuous, advantage remains concealed by China’s traditional demographic advantage and modern economic rise. Yet while China’s economy may currently dwarf its Indian counterpart, it has already begun to lose ground.

The signs of India’s economic modernization have grown since the resolution of the Cold War. Successive Indian governments have embraced the free market and pursued the integration of India into the twenty-first century global economy. Per capita income has consequently lifted as the Indian economy surpassed Britain in the late 2010s to become the fifth largest economy in the world. Its population, poised to surpass that of China, guarantees that India may one day possess the world’s largest economy, certainly by the century’s end.

The dynamic potential of India is clear. In 1960, India’s population was about 66% of China’s 680 millions. By 2000, the population of the subcontinent had surpassed the People’s Republic. In 2020, the Indian population is over 95% of China’s population. By 2025, its population should roughly equal that of the Middle Kingdom. Assuming its economy continues to value the same free markets that have hitherto delivered its enrichment, its rapid expansion will continue until its per capita income achieves a relative parity with that of other developed nations. When this transpires, India’s economy will acquire a size that is consistent with the magnitude of its population. As India will imminently become the world’s most populous nation, its economy will encounter an extraordinary opportunity that China’s own leadership had sacrificed.

No doubt India faces difficulties that China is largely unburdened by. Its ethnic and linguistic diversity precludes an obvious equivalent to the Han supermajority in China; its religious polarization between Hindus and Muslims creates a constant social tension; above all, its multi-party system complicates affairs in a way that the swift, efficient hammer of the Chinese Communist Party does not.

However, each of these apparent complexities contribute to the ultimate advantage that India possesses. A diverse, democratic India avoided the degenerative wound that China’s leadership inflicted upon the nation in the late twentieth century. It evaded the fate of one-child planning, it prevented the emergence of a state strong enough to dismantle its economy and people.

Thus, India protected the precious engine that will one day fuel its economic preeminence. It is a game of populations that predicts the leading nation of the world, after all; the winner receives the largest economy and so the greatest power. Beijing may appear today to be the force with the momentum to triumph, but the year that India’s population surpasses it will be remembered as the year that India settled the question of which giant shall lead the dawning Asian century.

Alex Williams recently completed his freshman year at Brandeis University. His interests include history, demography, film, and fine arts.


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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