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McKinsey have in a recent report discussed the race between China and India. “The race to growth,” it is called. Since, India’s stock-market, real-estate prices and professional salary levels are booming, it is easy to become excited. Yes, perhaps, India have that “demographic dividend,” perhaps, it can leapfrogged into the knowledge based economy or to the e-composed society. Perhaps, the IT industry in India will pull the whole country out of staggering backwardness. Yes, perhaps.

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India’s economy is booming and many analysts have increasingly spoken about India as a rising power. This has sparked great enthusiasm in the international community about the developmental potentials of India. A growing number of scholars and investment analysts have spoken about that India might surpass China. Hence, Goldman Sachs has praise India’s growth potentials and Barton M. Biggs, a well-known stock-strategist and former analysts for Morgan Stanley, has declared that “India will absolutely steal China’s thunder.”

Thus, the question has been addressed: Will India surpass China? The answer to this question is complex and there are two key dimensions I should like to highlight on this occasion. The first is the developmental consequences of the socio-economic differences between the two countries in a foreseeable future. The second factor is the institutional effects of the political system (and civil society) as a facilitator of economic and societal growth. While we know something of the basic implications of the first, we might be less certain about the exact effect of the latter. However, in this brief discussion I will concentrate on the answer to the first and then take up the question about the second in later essays in this blog.

By this token; does India really have a possibility to overtake China in a foreseeable future? The answer is a clearly no. Not only have China moved decisively ahead from India but India also suffers from fundamental societal problems, which make the idea of “surpassing” China quite unthinkable. Generally, India is a much more backward society than China. It scores worse than China not only on questions of infrastructure but on all significant human development factors.

The most crucial weakness of India’s social system from a developmental point of view is its relatively deplorable state of its human capital (when we consider India as a national statistic whole). India’s basic educational system is in a deplorable state and this goes along with the fact that at least half of India’s population is functional illiterate. In contrast, China has a comparatively well-functional basic educational system and according to OECD, illiteracy has essentially been eliminated as far as new entrants to the Chinese workforce are concerned. Generally, through its history India has placed the bulk of its investment in its higher education while its primary education never got focal attention. Also, India’s educational system is generally biased against girls. Hence, approximately 2 out of 3 illiterate persons in India are women. As a matter of fact, several African countries have a better literacy rate than India; the main reason is that many African women generally have a higher literacy rate than Indian women. Depending on statistics, the literacy rate in India is approximately at the same level or only slightly better than in Sub-Sahara Africa. What is equally remarkable is that China, which before was far behind India, now has surpassed India in the ratio of the population who attain higher education. The key factor here is that girls are much more integrated in the Chinese educational system than in the case of India.

One important difference between India and China is that China compared with India is a relatively well-integrated whole. This does not mean that there aren’t great regional and socio-demographic differences in China yet they pale with those differences that exist in India. India is really two different “societies” in one, a rich and a poor India divided. This is not quite the case in China, at least not by comparative terms. Why does this matter? It matters because China ultimately is able to establish a much higher societal efficiency of the factors of “production.” This is true not only in regard to economic factors but regarding all basic societal factors of institutional exchange. It doesn’t mean that the linkage of various institutional aspects of the Chinese society is without serious problems but these problems are relatively overshadowed by the problems prevailing in India. Especially, China at the current state is in a much better position than India in harvesting the broadest effects of its cognitive potentials because it is far ahead of India in its build-up of its digital technologies and educational structures and it can utilize it economically to a much higher extent because its basic infrastructure is much more advanced than India. Thus, in the end of the day, it all means that China can allocate its factors of production more efficiently – and more creatively – than in the case of India.

Indians are often dreaming of turning India into an IT nation or a service-driven economy. Thus an approach, however, is not a sustainable strategy because of India’s current state of illiteracy and deplorable education. One cannot establish a coherent knowledge-based society in a population, where half the population is illiterate and where the IT companies already are turning every stone to find sufficiently qualified people. Especially, the idea that IT can become the prime driver for the whole Indian nation has no correspondence in reality. India’s IT sector is certainly an important achievement and is a industry of great prospects but it only employs 1 million highly skilled professionals out of a total workforce of almost 500 millions and from 2006-2011 alone, it is expected that additional 71 million newcomers will join the Indian workforce. It is a calculus that doesn’t add up.

What demographics are concerned, India’s population is supposed to surpass China’s somewhere around 2040. Many analysts including Goldman Sachs have portrayed this “demographic dividend” as a great active for India and it is often an important part of an argument why India will “overtake” China. The realities behind this “demographic dividend,” however, are quite different. The great majority of the new generations of India’s manpower will be born among the most illiterate and most deprived communities of India, mostly in regions in the North and the Northeast. These newcomers to the Indian nation will be born into poverty in all its implications and they will attain the worst schools and receive the worst education India is able to offer, assuming of course that they will attain school at all. Basic statistics tell us that at least half of those born will suffer from child malnutrition and one out of twelve will die before they are five. Most of all an overwhelming number of them, especially girls, will be functional illiterate. These newcomers will not know of computers or internet because there will be no electricity and no money to spare. Since, the overwhelming numbers of this “demographic surplus” will be illiterate or semi-illiterate; it is very difficult to imagine how they will become a “positive economic factor” or a “driver” of India’s future growth. If anything these new millions will only add to the numbers in areas, which already suffer from excessive overpopulation, so that they will become an additional burden on a fragile system. Indeed, what has been portrayed as a demographic dividend could as well turn out to become a demographic disaster.

It is important to understand that the problem with India’s basic educational system and it appalling illiteracy rates is only a symptom of a much greater issue. The real problem with India is that the country never has been able to break decisively with its archaic and patriarchic past; large part of India is still embedded in quasi-religious costumes and archaic habits of which the caste-system is a crucial but by no mean the exclusive component. The “freezing” of India agricultural sector in a quasi-archaic structure is only a facet of this basic question. China on the other hand – because of its special civilizational bend – has to an important extent been able to move beyond these problems at least within the societal community although an important part of China’s patriarchic structure is still locked into the institutions of its political system. The problem in India is that the strength of its political institutions has been comparatively paralyzed by the backwardness of its societal structure, while the functional shortfalls of the political institutions in China so far has not been able to slow down the growth of China sufficiently so, by any decisive factor. So far the equilibrium of factors has been to China’s benefit but much will depend of what will happen with China’s political system in the years ahead.