India's vibrant young workforce offers a strong advantage in its ambitious pursuit to become a developed nation by 2047, making it an increasingly vital player on the global stage, said Chris Bradley, director at McKinsey Global Institute.
“The world in 2050 cannot be prosperous without India participating in it,” Bradley told ET in an interview, highlighting that India's demographic dividend was its ultimate advantage.
“China will lose 200 million workers to ageing by 2050, but India will gain at least 220 million workers from farm migration. So, there will be a massive shift in the labour pool to the Global South,” he added.
However, Bradley noted that for India to take advantage of this change, more people would need to shift to cities, and productivity would have to increase.
“The labour productivity of India is not high enough to make all this stuff the world needs. India’s productivity is 1/8th of Japan, and 2.5 times less than China,” Bradley said.
He pointed out that India requires its urban population to double from current levels, along with a productivity revolution, which would require more capital.
India’s urbanisation rate of 29% is less than half of China’s 65%.Bradley, however, highlighted that getting access to capital may not be an issue as India provides healthy returns on capital and was not overleveraged.“India has a fairly healthy balance sheet; it's not over-leveraged. It's got a large public government deficit. You can have a large deficit if your growth is high,” he said.
Bradley highlighted excess domestication and rural concentration as issues that needed to be overcome by the Indian government, along with investment in research and development.India’s R&D to GDP ratio at 0.6% is lower than the OECD average of around 2.7%.
“India imports seven times more IP than it exports,” he said.Bradley also noted that India’s participation in value chains also needs to rise, along with its energy requirement, to achieve prosperity.
“India can't be a first-world country without at least five times more energy per capita. For all the politics of the West, China and India will set the pace of decarbonisation,” he added.
While Bradley recognised India’s potential in services exports, he pointed out that the country needed to be more worried about Artificial Intelligence than China.“I think you should worry about AI more than you should worry about China as an export competitor,” he said, noting that the country was trying to transition to a developed country in a very different world, with concerns around green energy, restriction on capital and access to free knowledge and the rise of AI.