India Seizes Its Demographic Moment

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India Seizes Its Demographic Moment

When a nation has a large number of educated young people, it thrives.  Whenever there has been a period of rapid and sustained economic growth anywhere in the world, it can be traced to a disproportionate percentage of that nation's population being young and educated.  David Bloom, a demographer at the Harvard School of Public Health, coined the term "demographic dividend" to describe this fruitful intersection.

As highlighted recently in Strategy+Business,1 Bloom's work attributed 20 percent of the growth of the Gross National Product in the United States between 1970 and 2000 to the maturing of the Baby Boom generation, which was just such a youthful and educated group. 

Similarly, the maturing of East Asia's youthful population between 1965 and 1990 accounted for a third of that region's economic growth.

Looking further back, we see the same pattern emerge.  In the 19th century in England, young educated people created the Industrial Revolution.  Unfettered by families or financial concerns, young people tend to branch out and pursue their own dreams, become entrepreneurs, and create new technologies and businesses.  Their drive toward innovation results in rapid gains in productivity and robust economic growth. 

In the 21st century, the country most likely to benefit from those conditions is India, which is already in the midst of a mammoth economic boom powered by a youthful and educated population.  According to the new book, India's Century2 by India's Minister of Commerce and Industry, Kamal Nath, three-fourths of Fortune 500 companies and more than half of Global 2000 corporations have now outsourced at least part of their technological services to India.  Adopting the role of "the world's tech support center" is crucial to India's unique competitive positioning. 

By contrast, China's current global success rests largely on its ability to manufacture products more cheaply than anyone else.  During the '80s and '90s, hundreds of millions of young people were put to work at low wages, in government-subsidized factories. 

This manufacturing-based export model, pioneered by Japan, has worked well for China in the short term.  But in the longer term, it has led to a dramatic over-supply of global manufacturing capacity.  So, it now struggles to fend off imitators in countries like Vietnam and Malaysia...

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