Bigger Is Better
After more than 300 years, India is once again the world’s most populous country. China is not pleased. Beijing’s foreign ministry spokesperson Wang Wenbin was quick to claim that China still had over 900 million people of working age. He tactfully didn’t mention that this number was declining rapidly.
How rapidly? According to a United Nations report published on 19 April 2023, the most startling revelation is that China’s total population will halve from the current 1.43 billion to just over 700 million in 2100. India’s population, in sharp contrast, will still be 1.40 billion in 2100, having peaked at 1.60 billion in 2050 before plateauing. Crucially, the average Chinese, already nearly 40 years old, will be over 55 in 2100. The average Indian today is 28 and will still be only 40 in 2100.
Population and Productivity
What will be the impact of this on workforce productivity? As Roshan Kishore, the data editor of Hindustan Times, pointed out on 21 April 2023, “The 2022 World Population Prospects (WPP) data -- the basis of the United Nations (UN) report released on 19 April 2023 – shows that India is expected to have outgrown China in 2023 not just in terms of overall population but also working-age (15-59 year) population.
“India’s lead vis-a-vis China’s working-age population will become 1.5 times by 2048 and then reach two times by the year 2076. By 2100, till when WPP projections are available, India’s working-age population will be 2.3 times that of China’s. Ceteris paribus (all other things remaining the same), this should give a huge economic advantage to India vis-a-vis China.”
India’s workforce, while young and likely to outperform China’s workers in the next decade, has a low level of productivity today compared to both Chinese workers and global workers. Kishore notes the gap in value added between the average Chinese and Indian worker: “World Bank data show that China’s per worker GDP (in constant 2017 purchasing power parity dollars) was $33,004 in 2021, compared to USD 20,703 for India.”
India’s Workers Less Productive
The value-added productivity gap in per worker GDP is even wider with the average global worker ($41,017). India’s workers today are therefore 60 per cent as productive as Chinese workers and 50 per cent as productive as average global workers.
The way to fix this gap is through education and upskilling. Both are already taking place which is why UN projections show India catching up with the average Chinese worker’s value-added productivity in the next decade. With India’s working-age population projected by the UN to be 1.5 times China’s working-age population in 2048, raising the quality and skillsets of the Indian workforce is crucial.
Around 70 per cent of India’s population today – roughly 1 billion – is between the age of 15 and 65, regarded as a country’s productive workforce. To raise the skillsets of this large demographic segment in a low-income country is a challenge.
Fewer Women in Workforce
A granular examination of the UN figures points to the area that needs addressing most urgently: women in the Indian workforce. For those between the ages of 15 and 65, the labour force participation rate (LFPR) of Indian women is an abysmal 24.1 per cent compared to 60.4 per cent in China and 47.2 per cent globally. China’s economic surge during its 30-year demographic dividend, which began in the 1990s and is now tapering off, was underpinned by the high proportion of women in the workforce.
In India, women face three points of differentiation. One, many belong to socially conservative families where women are not encouraged to work after marriage. Two, women are often self-employed and do not register in LFPR data. Three, a number of educated women drop off the workforce after having children. When they return to work years later, opportunities have dwindled, discouraging many from continuing their careers.
The government’s Mudra loan scheme has addressed this problem by helping women in rural India and small towns to become entrepreneurs. It is one of the most understated successes of providing an alternative career to women. Launched in 2015, the Mudra scheme has cumulatively disbursed loans amounting to Rs 22.65 lakh crore as per the latest data (March 2023). Significantly, 45 per cent of those who have been sanctioned loans (which vary between Rs 50,000 and Rs 10 lakh) are women. Many have opted out of formal work to start small businesses with Mudra loans in food, finance, marketing and sales. Mudra loans have been disbursed to over 400 million bank accounts so far. Crucially, 69 per cent of these accounts are held by women.
There are many ways in which women can be brought back into the formal economy. Global firms like Apple have opened up new opportunities for Indian women in manufacturing. While men dominate the informal labour sector in construction, transport and logistics, electronics manufacturing and assembly could be the silver bullet to bring women into the formal workforce.
Though the number of people in China’s and India’s productive workforce between the age of 15 and 65 is roughly equal at around 900 million, India has an advantage in the age group of 15-24: 245 million people of India’s total population fall into this demographic slice. That number is the largest in the world and well ahead of China.
The key is to provide not only formal education to this segment but give it vocational training in jobs that require practical skills, not merely degrees. Most of the lakhs of workers employed by Apple’s contract manufacturers Foxconn, Pegatron and Wistron in China don’t have formal education. Yet, they form part of China’s productive workforce that has made it the factory of the world.
As China’s population ages and shrinks, the baton will pass to India.
