India Passing China As Most Populous Country: Does Size Matter?

The United Nations said on Monday that India will overtake China as the world’s most populous country by the end of this month. China’s population peaked last year at 1.426 billion and has begun to shrink. Meanwhile, India’s population will continue to grow over much of this century.

Why is this happening?

• China’s population is shrinking because of the long-term effects of its population control measures, including the One-Child Policy imposed in 1980. Beijing now encourages Chinese couples to have multiple children. But fertility rates continue to fall due to the high cost of living and rejection of traditional motherhood roles by Chinese women.
• Fertility rates in India have also fallen, but at a much slower rate. Traditional family norms prevail in India, particularly in its populous, conservative northern belt.

More population = more power? India eclipsing China in population does not necessarily mean it will become a more powerful country. After all, China’s population is four times greater than that of the United States, which has a stronger economy and military.

The China-India economic gap: China’s GDP is over $17 trillion — more than five times larger than India’s $3 trillion economy. On a per capita basis, the Chinese are more prosperous and enjoy a far better quality of life.

Can India catch up with China?

According to a forecast by Goldman Sachs last year, India will emerge as the world’s second-largest economy by 2075, but will still trail behind China. That means as the population gap grows, so too will China’s per capita income advantage.

A demographic dividend or burden?

There are two big barriers to India making the most of its burgeoning young, working-age population:

1. Poor quality of education: India produces roughly 1.5 million engineering graduates annually, but only 20 percent possess the skills for the knowledge economy.
2. The limited role women play in the formal economy: Women’s labor force participation in India actually declined from 2005 to 2018 and trails behind regional peers. Women make up just 23 percent of the labor force in India, compared to 23.3 percent in Pakistan, 32.4 percent in Bangladesh, 34.5 percent in Sri Lanka, and 45.2 percent in China.

India’s manufacturing ecosystem also underperforms.

• While India ranks among the top five in manufacturing globally, on a per capita basis China exceeds India’s output by nine times.
• India’s population is nearly 15 times greater than Vietnam’s but its manufacturing output is only 5 times greater.
• India ranks 46 on the Harvard Growth Lab Economic Complexity Index — behind Japan (1), South Korea (4), China (17), Malaysia (24), and Turkey (41). This index ranks countries by the state of their production knowledge, assessing the complexity of the products they export.

Military implications: China continues to cut the size of its defense forces. It’s aiming for a smaller, more agile, and technologically-superior military, leveraging the power of artificial intelligence. While India has larger military reserves and paramilitary forces, China outspends India by more than four-fold, according to Global Firepower. A big chunk of Indian defense spending is eaten up by salaries and pensions.

The bottom line: When it comes to workforces and military personnel, quantity does not equal quality. India’s numerical superiority provides no guarantee it will eclipse China. Economists Arvind Subramanian and Josh Felman, in an article for Foreign Affairs, write, “There is no inevitability, no straight line of causation, from the decline of China to the rise of India.”