Why India will supersede China – Part 1
For much of recorded history, India and China were the most influential civilizations in the world, partly due to the size of their populations and geography. Cultural and political reasons explain why China has outpaced India economically in the past 40 years. But China’s place in the sun will be shortlived. A report from the OECD predicts China’s share of global output will peak in 2030. India now outpaces China in economic growth. Indications are that the land of Rama and Shiva will become the shining star in the post-industrial era, and not for strictly economic reasons.
Demographics will play an important role in the development of China and India in the coming decades. China is aging more rapidly than almost any country in history. Its dependency ratio of retirees/workers could rise to 44% by 2050. This will have a serious impact on taxable income, entitlement programs and healthcare. China’s attempts “to become rich before it becomes gray” partly explains its enormous investment in robotics, biotech and artificial intelligence (including “AI-DNA”) to address looming problems with labor shortages, elderly care, and healthcare costs.
In the past 25 years, hardly a week went by without China setting new milestones. After lifting some 600 million people out of poverty, China became the world’s largest producer, exporter, and importer of virtually everything from electronics to oil and green technology. China is the largest trading partner for most countries in Asia, and close to becoming the most important economic partner of most countries in Africa and South America. The entry of 600 million Chinese workers in the global economy is the main cause for the deflationary pressure that is felt in the West and the rest of the world.
China’s exploding tourist industry suggests the country may succeed in getting rich before it gets old. It will soon be the world’s most important tourist market, both for inbound and outbound travel. Less than 10% of the Chinese currently have a passport, but Chinese tourists already make up the majority of the visitors in most Asian and some European countries. China is expected to replace France as the most visited country. In hotels around the world, Chinese payment systems start appearing next to the familiar logos of Visa and MasterCard.
The end of poverty
China’s economic growth has slowed in recent years to a more manageable 4- 5%, while growth in India has accelerated to 8%. Despite the geopolitical rivalry between the Asian giants, 68% of Indian imports come from China, compared to 25% from the US. 16% of Indian exports go to China, against 48% to the US. The latter explains the growing trade friction between the US and Asia.
China is India’s leading supplier of capital goods used by Indian producers to manufacture products for the Indian market, and it is the dominant supplier of consumer electronics and green technology, including solar panels. Chinese suppliers control 87% of the Indian solar panel market, in part because of China’s economies of scale and in part because of subsidies from the Chinese government. Indian producers complain they can’t compete with the Chinese makers, but others argue that Indian consumers benefit from inexpensive solar panels subsidized by the Chinese government.
India also benefits from other inexpensive Chinese consumer electronics. Chinese makers of smartphones control more than a 50% share of the enormous Indian market. Indian producers find it hard to compete, let alone catch up, with Chinese hardware manufacturers.
India has long been a powerhouse in software services and has now set its sight on artificial intelligence
But India has long been a powerhouse in software services and has now set its sight on artificial intelligence. According to the networking site LinkedIn, India ranks third in the world after the US and China in terms of AI skills among its workforce. The country has a disproportionally large IT industry and strives to become a global AI hub for developing countries.
A discussion paper from government think-tank NITI Aayog, “National Strategy for Artificial Intelligence,” pitches India as the “AI garage for emerging and developing economies” with a focus on five key sectors – healthcare, agriculture, education, smart cities & infrastructure, and smart mobility & transportation. Globally, there is little innovation in the social sector and a focus on agriculture could make India a model for other developing countries.
India’s agriculture sector employs nearly 50% of the population but contributes less than 18% to its gross domestic product. Given the growing popularity of urban and organic farming, India could strive to make its farmers more productive rather than reducing their number for its own sake. Making farmers more productive can also limit the flight to the city and reduce environmental pressure caused by urbanization.
India is repeating China’s feat of massive poverty reduction. Between 2006 and 2016, India lifted more than 270 million people out of poverty, at a rate of 44 per minute, one of the fastest in the world. If the country continues to grow at the current 8%, it will have eliminated poverty by 2030, the same year that the UN-sponsored Sustainable Development Goals blueprint aims to eliminate global poverty. Extreme poverty is defined as living on less than $1.90 per day. The 10 fastest-growing economies in the world, six of them in Africa, are also expected to end extreme poverty by 2030.
Hierarchy of needs
What happens to countries that have eliminated extreme poverty and have provided the majority of the people with their basic needs? Western nations, Japan, Korea, and other developed countries, paint a less than rosy picture. Levels of material well-being have increased dramatically over the past 50 years, but so have social and psychological isolation, alienation and drug abuse. Depression, the main cause of suicide, claims more than a million lives per year, indicating that material comfort does not automatically translate into mental well-being.
While pockets of poverty remained, the US reached material well-being for the majority of its population in the 1960s. The “Sixties Generation” grew up in material comfort, which led to alienation as well as a search for “meaning” and a growing interest in spirituality, including Eastern spirituality. The so-called counter-culture movement focused on “raising consciousness.” Yoga, meditation, “healing,” mental coaching and counseling became growth industries. The Global Wellness Institutes estimates that the global wellness industry is now worth $3.7 trillion and is growing by over 10% a year.
Falun Gong was a reaction to the “materialist” outlook inherent in communism that was further fueled by economic liberalization
The US pattern repeated itself in Europe and has also reached East Asia. Japan and Korea saw growing levels of depression, alienation, social isolation, as well as the birth of new spiritual movements and cults often centered on charismatic leaders. The trend has also reached China. The quasi-spiritual movement Falun Gong, (literally “Dharma Wheel Practice”), has attracted 70 million followers. First taught publicly in Northeast China in 1992 by master Li Hongzhi, Falun Gong mixes Buddhist and Taoist disciplines with a Confucian-inspired moral philosophy based on truthfulness, compassion, and forbearance. Falun Gong was a reaction to the “materialist” outlook inherent in communism that was further fueled by economic liberalization.
In the 1940s, the American psychologist Abraham Maslow introduced his famous “hierarchy of needs,” a theory of psychological health predicated on fulfilling innate human needs in five stages. Maslow’s pyramid-shaped diagram mirrors the development of modern society in fulfilling five needs in five consecutive steps: physiological, safety, love/belonging, esteem, and self-actualization. Maslow later added a sixth and arguably ultimate need: transcendence.
Economic and political mismanagement have prevented many developed countries from providing for people’s basic needs, but the global trend of poverty reduction is progressing, and it confirms Maslow’s theory: When basic needs are fulfilled, people start looking for meaning and the nature of consciousness. Making a life becomes as important as making a living.
Part 2 of this article can be found here.