India Inc will never catch up with China

India’s business elite who show up at such events as the World Economic Forum’s meetings in Davos and similar confabs in New Delhi repeat like a mantra that the country’s demographic dividend is one of its advantages over China. Many of its politicians share this view. Kamal Nath, India’s flamboyant urban development minister, has argued that China will grow old before it becomes rich.

Their thesis is that with millions of young people entering the labour force – at a rate of 12m annually – India’s growth rate is bound to surge as incomes and savings rise while China will soon face labour shortages due to its one-child policy.

In a perfect world, this might be true, but India is a grotesquely unequal world where millions of children struggle to get enough food or a decent education.

As many commentators tartly observed when theIndian government announced a mission to Mars last week, the country is home to about half the world’s severely malnourished children. Meanwhile, only 23 per cent of Indians have received secondary education – much of it of variable quality – while more than twice as many have in China. Where China has the challenge of getting more young people through college, India is still grappling with the problem of ensuring they don’t drop out – of primary school.

The demographic hot air-balloon floated by many Indian businessmen, like the share prices of their companies, has begun to deflate. It turns out that India is not competing with China for manufacturing jobs after all. In the past couple of years, as China’s wages along the coast where its export industries are concentrated have been rising at about 20 per cent a year, low-end manufacturers have started moving elsewhere. This would seem an ideal time for India’s demographic dividend to be cashed, but the jobs making jeans and shoes are heading instead to China’s inland provinces, Vietnam, Bangladesh and Indonesia.

China has done a good job of investing in education, says Arthur Kroeber, head of the economics consultancy Gavekal Dragonomics, which means that its young workers will continue to be productive well into their 60s. India, on the other hand, has not done enough. “So, its economic growth will be slower and it will have an even bigger problem than China when its population starts to age,” he says.

Earlier this summer, as I waited to board an aircraft to Delhi, I bumped into Ranjan Mahtani, the Indian-born chief executive of Hong Kong-based Epic Group, which supplies clothing to Gap and Abercrombie & Fitch and which has 15,000 workers in Bangladesh. I had seen him a week earlier, when he complained that he was struggling to keep up with demand for this season’s fruit-coloured jeans.

I thought Mr Mahtani’s trip might mean he was prospecting for a new factory. But Mr Mahtani was going to Delhi for just one night, to meet with the new head of a major US retailer and have dinner. He says he finds it easier to hire for large factories in Bangladesh, in part because of India’s stifling labour laws. But the poor quality of state education is arguably just as pernicious. A 2011 survey of government schools in India by Pratham, an education-focused non-governmental organisation, found that half the country’s Class 5 of 10-year-olds could not read a text suitable for children three years younger. The results were virtually unchanged from a few years earlier.

Rukmini Banerji, head of Pratham in Delhi, told me that a senior government official in India’s education ministry had derided the findings, saying the organisation was obsessed with quantitative measurements of aptitude while ignoring “the native intelligence of the young ragpicker”. It may be hard not to admire the ingenuity of India’s street-smart ragpickers but surely it would be better if they were in school.

India, however, is a country where government ministers in Bangalore rail against schools that teach in English rather the local language of Kannada, while placing their own children in those English-language schools.

Delhi, meanwhile, seems the most cosseted capital in the world: the people who decide that India must attempt a mission to Mars live in vast colonial bungalows while the boys in the government school I visited in west Delhi sat on a grimy rug in a dingy room. The people who run the system really do live in another universe.