China has always been a strong competitor to India in terms of Economic Growth. However, India is expected to emerge out as the fastest growing economy by 2013 -2014. Globalization, being one the most important factor contributing to this. Traditionally Indian society has been conservative about the earning member in the family. Leaving a, comfortable more than half of the total population on India, which is as of today nearly 1.18 billion; unemployed. India’s current unemployment rate is somewhere close to 7.8%.
The demographics of India are remarkably diverse and we are the second most populated country in the world. Nearly 50% of India’s population is below 25 yrs of age and over 65% below the age of 35yrs of age. The median age is basically that age which divides the total population into two numerically equal groups; half of the population younger than this median age and the other half over this median age. India’s median age is around 25.9 years. This is one of the lowest median age as compared to other major economies. For example Australia has a median age of 37 yrs and China: 35.2 yrs.
In general when an economy prospers, the death rate and the birth rate both decline. Former followed by later. So logically, this will lead to more no of working age population as to the non-working age i.e. no of old and children decrease considerably. This automatically reduces the dependant population. The ratio of nonworking to working age population decreases. The twin effects of this; increase in the number of working people who contribute to growth. As the number of dependants reduces, individual savings increase. Overall effect is the increase in the country’s rate of savings.
Structural reforms play an important role as the increase in work force increases. Finding work for those who offer to work is an essential element due to which even with a stagnant per capita output, the sheer increase in the number of workers would increase the GDP. (GDP is gross domestic product: measure of country’s overall official output). Imagine the impact on GDP if the productivity improves. This is what reform is aiming at it is pushing up productivity per worker.
India’s GDP has averaged around 6.07% while china’s GDP has averaged out to around 10 %. The major factor being exports. China has been capturing the world market. However, China’s exports growth would continue to slow in line with an expected slowdown in economic growth in the United States and European Union, they being the major markets for China’s exports. China is expected to come down with a growth rate of 9% in 2012 and around 8% in 2015. As against this, India’s Growth rate will jump to a 9% and remain persistent to 9%-9.5% in 2013-2015.
The main reasons for this will be increase in consumption; quality and quantity. Increase in savings and investments. Increase in government expenditures which mainly include infrastructure and, machinery and equipment and the net exports (exports – imports).
Mathemtically this is simply C+I+G+X = GDP.
C—consumption
I— Investment
G—government spending
X—net exports.
In the near future India is expected to see a persistent increase in all these factors due to which GDP will increase persistently as against China’s.
