Harsh Gupta Madhusudan@harshmadhusudan
Smart Chinese analysts have started talking about US and India fighting for #2 slot in the coming decades, while Beijing takes #1 slot. That is good, for despite their non-democratic system (and hence no internal competitive pressures), they finally feel emboldened to claim top slot. Why not? They certainly have a strong shot - definitely better than America's which is 1/4th their population. May these analysts speak more openly in coming years. Enough hide-bide.
Meanwhile, this is the demographic lay of the land when juxtaposed against India, which is also investing in its human capital. The difference of differences of working age population over the next 25 years (China falling, India rising) would be more than the entire US population. If you define it as 15-64 it is slightly more (like here) and if you define it as 25-64 the number is a bit less, that is about it.
Demographics is not destiny in toto yes, but a key part. So additionally, to get 5% GDP print the Chinese are adding crazy total debt to their systems. India is growing at 8% while deleveraging. Going forward, a ~3% per capita real growth gap (and hence ~2% RER gap too) can be assumed for a couple of decades. So that makes it Demographics and Debt which are both tailwinds for India and headwinds for China. Decarbonisation and Digitalisation are tailwinds for both India and China. Democracy is a tailwind for India and lack thereof a headwind for China going forward. And finally, India's Domestic oriented model is much more sustainable than China's geo-economically.
Of course nothing is automatic or pre-destined but policy is endogenous to politics which in turn is endogenous to societal factors, on which I am very structurally constructive in India. Three generations ago, China was bigger than undivided India comfortably. Now 'truncated' India is bigger than China. In a generation, even the civilisational core will outnumber China's equivalent within a generation.
Modinomics is the catalyst. Whether you believe in structural-forces historiography or the great-man version (reality is a bit of both), Narendra Modi is the Deng, the Bismarck, the Lincoln of India. He has further united India, further stabilised it, further invested in its future with an iron hand where needed within a democracy and he is not yet done. Things could have been very different, but then again I do think, angularities of key-men-risk aside, increasingly good governance is now endogenous to India's increasing coherence.
India is going to be the world's largest economy by mid-century and it will not stop there, for the ultimate metric is per-capita and not aggregate. It has all the institutions and complexity required, all the anti-fragility and huger necessary. Our system does not require bide-hide and in any case, the Americans and Chinese have hardly been friendly so there is not much to gain anyway. They have seen the movie before and they are now witnessing the sequel's trailer. India will arrive after announcing its arrival.
Those who feel this is triumphant - I disagree, for I think there is nothing special about an average American or Chinese citizen compared to an average Indian one. Those who think this is too premature, I understand that but constant negativity has its own reflexivity so why not let us see the empirical trends and where it leads us. India's scale is such that every measure of progress converts a previous headwind into tailwind (internal fissures get dissolved, elite agricultural taxation becomes viable, urban governance gets prioritised, cost of capital reduces, civilian and military indigenous technology gets demand aggregation, and so on.)
So yes, as 2025 ends, do not be "blackpilled" or whatever the kids say. India is here to rise and #1 is for us to lose. We will continue to work hard for that, but why should we shy away from ambition?
