How India Can Use Its Numbers

Introduction: While no one can predict the next world order or India’s place within it, one area where policymakers can make bets with relative certainty is India’s population. India’s population currently stands at 1.36 billion, and forms about 17.7% of the world’s population. It is the second largest nation in numbers, and is poised to be the largest in a few years. Aside from natural disasters or nuclear wars, etc., India is unlikely to lose its place as the world’s most populous nation.

While discussing India’s place in the new world order, it is pertinent to discuss areas where India’s large population will be a distinct advantage. I have identified three policy areas where a large population helps exploit other gains, provided we treat the entire populace as one single market, without regulatory bifurcations.

The first policy area is based on division of labour being limited by the extent of the market. The larger the size of the markets, the greater the division of labour, and therefore specialisation and productivity. India has the opportunity to create the single largest domestic market in the world. Currently, the opportunity is unrealised as the Indian market is fragmented due to poor internal tax and tariff regimes, enforcement, and a crippling lack of infrastructure. But a single market the size of India, can unleash gains from trade and productivity, and therefore economic growth, never experienced before.

Second, India’s population gives it a unique advantage in goods, infrastructure, and services that require economies of scale. India’s urban density of population, its current migration pattern from rural to urban areas, and its increasing number of cities, make it ideal for exploiting economies of scale, particularly for provisioning public goods and healthcare. Public transport and mass transit services, public infrastructure, etc. are fiscally possible and sensible in India’s great metropolitan areas, but also in smaller cities due to the density of population.

Third, the new information economy is largely built on network effects. Social media, e-commerce, entertainment, etc., are network goods, and network goods famously compete for the market, not within the market. India is pegged to be the largest market for most network goods globally over the next few decades, and India is in a position to drive content uniquely to its advantage.

What should Indian policy makers pursue in the new world order? The answer is simple — economic growth. Since the 1991 reforms, a higher rate of GDP growth sustained over the years has lifted over 170 million Indians out of poverty.1 Sustained economic growth has given India greater importance on the global stage and made the lives of hundreds of millions of Indians better. In this sense, no matter what the global order, the policy imperative for Indian policymakers, is to pursue policies that boost India’s economic growth rate. Open trade and globalisation increase growth and productivity over the long run. However, trade relations are highly sensitive to the New World Order. For this reason, the only policies discussed here are those pertaining to the domestic market, relying on India’s large population.

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