April 24, 2006

The demographic dividend

The constant argument between Delhi and Mumbai played out ad nauseam on TV channels which is the better city, which has the better fashion week, which is safer for women, which has a superior professional culture, which has a more interesting night life is symptomatic of how most of us still think: small.

Delhi vs. Mumbai is the argument of the defeatist. The real argument should be Mumbai and Delhi vs. Shanghai and Beijing. For any Indian visitor who has been to China’s capital and commercial megapolis, the comparison with India’s two major cities is an embarrassment.

While earnest intellectuals and fashionistas in Delhi and Mumbai compare their respective cities’ lounge bars (but not slums), Beijing and Shanghai have built cities that rival anything you will find in North America, Europe or Japan. The Chinese have done this by thinking big and powering FDI into infrastructure.

While India dithers at allowing FDI into realty, retail and other infrastructure projects, the Chinese have used a large chunk of the $60 billion they receive annually to build superhighways, townships, special economic zones and retail complexes on a scale perhaps only the Ambanis in the private sector in India have even envisaged.

China has a 12-year lead over India. It began economic reforms in 1979 under the visionary Deng Xiao Ping. India's economic reforms began in 1991 under the compulsion of bankruptcy. So can India catch up with China over the next decade or so?

Crunch some hard numbers. China has nearly 100 million Internet users and 450 million cellphone subscribers. India, despite signing up 2.25 million new cellphone subscribers every month, has only 50 million Internet users and 90 million cellphone users. Over the next five years, nearly 40 per cent of all PCs and a significant share of all cellphones sold worldwide will be in India and China. According to data computed by the US-based Computer Industry Almanac Inc., the number of Indians using the Internet is around 50.6 million. India had a meagre 1.40 million Internet users in 1998, which rose to 39.20 million in 2004. This has now shot up to over 50 million. And yet, Internet penetration in India is just 4.5 per cent of our total population. Compare this to China, where the penetration level is 8.5 per cent of the estimated population of 1.31 billion.

Last week, a major new international study predicted that India's demographic dividend will allow its economy to grow at 7-8 per cent a year till 2025 even as growth in ageing China slows. In the coming two decades, India, already a young country, will get demographically still younger with 700 million of its 1.20 billion people in 2025 under 35. India will also have the lowest percentage of elderly people compared with Europe, North America and Japan. Ironically, despite this, the political leadership in the West and Japan is getting younger. The current opposition leader in Britain, David Cameron, is 39 while India's leader of the opposition, LK Advani, is 79. Across ageing Europe, the US and Japan, those in charge are in their 40s and 50s. At 60, most active political careers are deemed over. In India, the current average age of the prime minister and the president is over 75.

Wisdom is a virtue of age but energy, freshness of ideas, enthusiasm for change and the ability to absorb new technology are not. Old, wise men guiding a thriving, young India into the second quarter of the 21st century while the West and Japan have ever-younger leaderships grappling with their ageing, unproductive populations is a global irony and not a pleasant prospect.

The stray Rahul Gandhi, Sachin Pilot, Jay Panda, Akhilesh Yadav, Jyotiraditya Scindia and Milind Deora will not solve the problem. These young men have not been thrown up by a dynamic, meritocratic political system that rewards young people but by sycophancy of the surname.

The key thus is political reform so that the culture of feudalism that remains embedded in our politics is gradually weaned away to be replaced by a technocratic meritocracy. In short, good governance. Then imagine: a demographically virile India led by a young, talented political leadership. The result: the world's second largest economy and the world's largest, most dynamic, multi-cultural nation. In 2006, that might appear fantasy. Twenty years from now, if we get our governance right, it will be reality.


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