India Population to Pass China, but GDP Another Matter

The UN report on world population says:

The new projections include some notable findings at the country level. For example, the population of India is expected to surpass that of China around 2028, when both countries will have populations of around 1.45 billion. Thereafter, India’s population will continue to grow for several decades to around 1.6 billion and then declines slowly to 1.5 billion in 2100. The population of China, on the other hand, is expected to start decreasing after 2030, possibly reaching 1.1 billion in 2100.

The contrast between the gross domestic product (GDP) of the two countries shows the extent to which the population growth of India will work against it, as its GDP per capita will never rival that of the People’s Republic. Most estimates put China’s GDP at just below $8 billion. India’s is closer to $1.9 billion. And China’s GDP growth rate current runs between 7% and 8%. India’s recent improvement has been closer to 5%. Gains in population actually may be counterproductive.

An analysis of GDP per capita shows an even sharper difference between the health of the Chinese and Indian economies. On a purchasing power parity (PPP) basis, China’s is about $9,000 per year. India’s is closer to $3,600. The difference shows the huge gulf between the productivity of the two economies, both in terms of China’s manufacturing and export prowess and the rise of its middle class.

India has set a number of rules and regulations that make it hard for foreign investors to move into the country. This strangles the opportunity for growth leveraged by outside capital. One example of this was pointed out by The Wall Street Journal:

Tax proposals in the national budget unveiled in March [2012] stunned foreign firms. They could create significant retroactive tax liabilities for international mergers stretching back a half-century and eliminate a tax exemption many investors now have, wreaking havoc on corporate deal making, legal experts say.

Corruption is another plague to the Indian economy, making it both more inefficient and making foreign attempts to move into the nation less likely. Based on the “Corruption Perceptions Index 2012,” India ranked as the 94th most corrupt country in the world. China ranked at 80th. China’s number hardly qualifies it for sainthood, but it is another circumstance in which it bests India.

As, year after year, India’s population grows and its economy does not, compared with China, its position as the world’s top nation by the number of people who live there looks less and less like a prize.