China's President Xi Jinping and India's Prime Minister Narendra Modi attend a session meeting during the 10th BRICS summit on July 27, 2018 in Johannesburg, South Africa.
When Rajan looks at the Indian economy, he sees a ticking clock. India, he says, is currently experiencing what social scientists call “the demographic dividend.” It has a lot of young people entering the workforce and relatively few old people. This Goldilocks period for growth, Rajan predicts, will only last about 25 years in India. After that, the country’s population will skew older, fewer people will work, and more people will require government assistance to meet their needs.
The big reason why: manufacturing has become much more competitive. When earlier developers, like China, entered the marketplace, they were competing against “costly Western labor,” Rajan says. That gave them a big competitive advantage: cheap labor. With the explosion of remote work since the pandemic, Rajan believes the outsourcing of services to India can be supercharged. To borrow from his book's title, Rajan now believes India can break from the cookie-cutter mold of manufacturing-led development and leapfrog into service sectors that have tended to be dominated by the workers of rich countries.
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