India: Unseized Opportunity

India: Unseized OpportunityRecent articles have been calling attention to the success of China in reducing the number o her citizens living in extreme poverty, a line demarcated at earnings of less than $1.50 a day. Today, 680 million fewer Chinese live below the extreme poverty line than did thirty years ago. This drastic reduction is largely attributed to the massive urbanization China has undergone since the 80s, with millions of impoverished rural Chinese moving to cities to seek out jobs, mainly in manufacturing. And while these workers may now still live in poverty, they at least now are above the extreme poverty line.

So what then is going wrong with China’s neighbor across the Himalayas? India today has nearly the same number of impoverished citizens as it did thirty years ago, 400 million. And while that may be a drop in percentage, as India’s population has boomed, it doesn’t exactly represent a giant leap forward.

China and India have paralleled each other for some time with regards to population, but that reflection is at an end, with China’s population now trending downwards, while India’s continues to rise. So is India poised to become the next China and take over manufacturing duties for the world? It is true that there’s a shift occurring in China. The labor force is shrinking while wages increase, and as the country continues to increase its global economic presence many manufacturing jobs in China will soon be moving elsewhere. Cumbersome bureaucracy, however, and a lack of suitable firms and factories, may prevent India from competing for these 85 million manufacturing jobs. Other Southeast Asian countries already have the infrastructure in place and are absorbing some of the demand for cheap manufactured goods as China’s economy shifts. India is in danger of missing out or being bypassed as this opportunity presents itself.

The size of India’s workforce is poised to surpass that of China within the next few years. The question that lingers though is whether these millions will have somewhere to turn. India could well experience the next boom and emulate the growth of China, but the necessary reforms have been slow in coming.

The opportunity is there, but it’s anyone’s guess whether ‘Made in China’ will become ‘Made in India’ anytime soon.

David Wilson

Sources: The Economist
Photo: IBT