Economy’s internal dynamics display great energy

That India overtook China as the most populous country earlier this month has prompted some Western media outlets to gloat over the acute social problems such a large population will cause to India, and a fast aging population will create for China. That angle reflects a typical mindset of some narrow-minded people in the West, who cannot wait to see China’s supposed decline with the aging of its population, and they don’t want to see India develop as fast as China did either.

The median age of the Indian population is 28.2 years, that means those aged 25 and below account for about 40 percent of the country’s population. However, if India cannot create enough jobs for them, its otherwise demographic strengths and potential will become a burden. It is for that reason that Africa has not yet become a world growth engine even though it has been seeing the fastest population growth for decades.

India’s economic growth comes from rising labor productivity among those who are employed, not population growth, as India’s labor force participation rate is even lower than that of Bangladesh and Vietnam.

That explains why the Indian government has formulated various policies in recent years to develop the manufacturing industry so as to create more jobs. But at the same time India should never ignore improving the overall quality of its labor force, and addressing issues ranging from infrastructure to market governance.

It also needs to accept that neither investment nor trade growth will be sustainable if the two do not go handin-hand. The discriminatory policies New Delhi adopts toward investment from China must be adjusted, if it seeks to put the Indian economy on two legs of investment and trade, as the country’s comparatively low quality of labor force as a whole, and less-developed infrastructure and governance models are all negative factors no potential investors from developed economies will ignore.

As for China, it has been preparing for an aging society for years, even if its population peaked last year, much earlier than expected. The country has been actively promoting its economic transformation and upgrading, and raising the quality of its work force and the overall productivity and efficiency of its economy, so that it can improve its competitiveness, increase people’s incomes and expand the size of the middle-income group to realize the sustained expansion of domestic demand, a key driver of growth in most developed economies.

That being said, as long as India and China can effectively tackle their respective challenges, which entails their cooperation in many fields, they will continue to be growth engines in the decades to come.