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Monday, 17 October 2011

India: Tiger, tiger, burning bright



When a 74-year-old social activist from Maharashtra launched a crusade against corruption over the Indian summer, he struck a chord with the nation’s youth.

Anna Hazare was not an obvious icon for a country with one of the world’s most diverse and youthful populations. An ascetic Gandhian activist dressed in spotless white kurta pyjamas and cap, the former army driver is something of a throwback. He preaches against consuming meat and alcohol, follows a formidably strict personal regime and speaks up for farmers.

Yet his hunger strike for tougher anti-graft laws roused tens of thousands of flag-waving, T-shirt-wearing young people, many drawn from India’s middle classes, on to the streets. His message spread quickly on mobile phones, social networks and broadcast media.

Diplomats and commentators in New Delhi, the capital, are still weighing whether the protests led by Hazare are a sign of bigger things to come in the world’s largest democracy.

Some see it as the flexing of demographic muscle, where young people have greater expectations than their parents, rising incomes and access to information about the outside world.

Others view the events of the summer as a new challenge to a lofty political class, elected in large part by rural populations, out of step with fast-growing urban populations and under pressure to deliver food, education and jobs.

Well they might – India has one of the youngest population profiles in the world. Its exuberance, alongside a growing economy, is a catalyst for change. More than 70 per cent of the population is under 35.

Within a decade India will have a far younger population than other large economies. By 2020, the median age in India will be 28, compared with 37 in China, 38 in the US, 45 in western Europe and 49 in Japan. India’s population is forecast to overtake China’s as the largest in the world by about 2030. India will then account for 20 per cent of humanity, while laying claim to only 3 per cent of the world’s landmass.

These figures suggest a population density that will put massive pressure on natural resources in a sub-continent dependent on seasonal rains and the health of fragile Himalayan river systems.

Yet the country’s youthfulness is largely taken as a great advantage. Investment banks, such as Goldman Sachs, usually refer to a young population as a “favourable demographic” that will support economic growth over the next 20 years. Others warn that this dividend could easily turn into a deficit if India fails to educate its young people, keep them healthy and provide them with jobs.

At a time of high inflation, another pressing question is whether India will be able to feed its people, most of whom scratch a living in the countryside, at affordable prices.

“A rising labour force, coupled with a limited talent pool, has made policymakers increasingly aware of India’s much-touted demographic dividend potentially turning into a nightmare if job creation and education are not given priority,” warns Rohini Malkani, economist at Citigroup, the bank, in Mumbai.

In spite of being the world’s fastest-growing large economy after China, India has dismal human social indicators that place its population in worse shape than neighbouring Pakistan, Nepal and Bangladesh. Development economists such as Jean Dr├Ęze complain that two decades of high economic growth has done little to improve the lot of the country’s poor, who suffer bad health and early mortality.

The expansion of India’s population has preoccupied ­sociologists for decades. Today, the population is estimated at 1.2bn people, up almost 18 per cent on 2001 figures.

Encouragingly, the growth rate has eased. People have also become richer. Citigroup estimates that the middle class – people with an income of between $6,000 and $30,000 a year – now numbers 160m. Within five years, this is forecast to grow to 267m people.

Rising incomes, competition for jobs and urbanisation is persuading families to have fewer children. Close to 10 per cent of Indian households are opting for only one child as they seek to concentrate resources and maximise opportunities for their offspring. Research from the National Council of Applied Economic Research shows the trend is most pronounced among educated people in metropolitan areas. Nearly a quarter of university-educated women said they would prefer to have only one child in an environment that traditionally favoured big families.

Malkani is optimistic. Literacy has increased markedly in the past 10 years. The urban population has a literacy rate of 85 per cent, while the rural population trails at 65 per cent. The gap between male and female literacy has also narrowed.

People are moving to cities for greater opportunities. Urbanisation of the population has risen to 31 per cent today, from 27 per cent in 2001. The move to cities is a sign that growth is felt across geographies in the region.

Poverty is declining, though not fast enough. The number of people below the poverty line, by some calculations, has fallen.

Dinesh Thakkar, chairman of Angel Broking, a stockbroker in Mumbai, says consumption by India’s young population is likely to buoy the economy for the next 20 years and assure the success of such sectors as banking, consumer goods, pharmaceuticals and property development.

But challenges in job creation, food security and urban infrastructure remain formidable.
A recent World Bank study on food prices across south Asia emphasises how agricultural output, which is growing at a slower rate than before in India, needs to keep pace with population growth and shifting consumption patterns.

Another study by McKinsey, the consultants, shows the need to improve urban infrastructure – roads, water and sanitation – if living standards in cities are not to decline over the next decade.

Water resources are of particular concern. Brahma Chellaney, professor of strategic studies at the Centre for Policy Research in New Delhi, warns that growing populations and demands on water resources have placed the world on the cusp of severe water shortages. Asia, he says, is highly vulnerable to future flashpoints between countries. There are 57 river basins in Asia, yet there are only four trans-boundary agreements.
Education is also a worry. A recent study funded by Canada’s International Development Research Centre showed that no teaching took place in half the primary schools in India’s populous Hindi-speaking belt, prompting some experts to claim that India’s education was on par with conflict-torn countries such as Yemen and Afghanistan.

“Though the wealth of human capital is a basis for optimism about Indian innovation, there is a real danger that this optimism is based on a mirage of mighty labour pools,” says Nirmalya Kumar, a professor of marketing at London Business School. “The country is still far from creating an infrastructure that can pump out … high-quality talent.”

Stuart Davis, chief executive of HSBC India, the bank, identifies job creation as key to ensuring the demographic dividend does not go awry. Economic expansion needs to produce jobs to soak up millions of school leavers every year, he says.

Rajiv Kumar, secretary-general of the Federation of Indian Chambers of Commerce and Industry, agrees. He argues that India’s policymakers need to prioritise sustaining high economic growth over fighting inflation. “If employment and growth fall then we risk the possibility of social unrest,” he says.

One policymaker convinced that India’s demographic bulge is positive is Nandan Nilekani, former chief executive of Infosys, the Bangalore-based information technology outsourcing company. Now a government official, he believes that India, alongside China, can return to the dominant position they held in the world economy before the 18th century. A large, young population should be a contributor to India’s rise.

Democracy will be a key advantage in managing what lies ahead. Protests, like the one led by Hazare, and problems are likely to multiply. Many take comfort that India’s system of governance gives it the capacity to absorb pressures and accommodate pluralism.

“It is remarkable how in the last 60-plus years since independence, the Indian political system has been able to contain conflicts and douse the fire,” observes Amitabh Kundu, professor of economics at Jawaharlal Nehru University in New Delhi. India’s boisterous demography will test that flexibility.

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