Quotes of the Day

Officials and business leaders meeting in New Delhi could not have asked for more auspicious news as they gathered last week for the World Economic Forum's annual India Economic Summit. While the three-day event was in progress, the Bombay Stock Exchange's Sensex index hit all-time highs. That milestone was followed by the cheering news that the Indian economy grew at an 8% rate during the quarter ending Sept. 30, underscoring once-moribund India's claim to being the fastest-growing free-market democracy in the world.

There's a reason, however, that the boast requires qualifiers. Undemocratic, not-so-free-market China continues to set the economic pace with GDP growth exceeding 9%—a fact that seemed to dampen enthusiasm in New Delhi in the face of otherwise encouraging circumstances. In Asia, "China is clearly the leader of the flock," conceded India's Finance Minister Palaniappan Chidambaram. "India is still just part of the flock." That chronic inferiority complex is rooted in industrial policy envy. China maintains a big advantage over India in sectors such as manufacturing, said Chidambaram, because its central government dictates "with brutal efficiency" such initiatives as the construction of commerce-greasing infrastructure projects. Meanwhile, India's fractious government—the ruling coalition is made up of more than a dozen political parties—is unable to move quickly with business-friendly plans of its own.

Yet Indian politicians at the summit expressed confidence that the country will eventually catch up—not because the government will necessarily get its act together, but because of a long-term trend known as India's "demographic dividend." With 1.3 billion citizens, China is the world's most populous country; India is second with a population of 1.1 billion. But because of Beijing's long-standing one-child policy, China's working-age population will begin to decline in the next 10 years. Meanwhile, India's youthfulness—350 million of its citizens are under age 15—ensures its workforce will expand for decades, potentially enabling it to outstrip China's economic pace through sheer weight of numbers. "This is a key thing," said Kamal Nath, India's Minister for Commerce and Industry. "China is aging faster than any other country in history. It is growing old before it has grown rich." It's one surprising side effect of Beijing's brutal efficiency that may eventually work to India's competitive advantage.

• Jim Erickson
• Hoping for a "demographic dividend" to keep the economy booming