So Eddie, sweet heart, will you stop this India-is-going-to-be-gr8-with-demographics posts when Japan rises rates ? (even though demographics of Japan is not condusive for rising rates ?

That’s one hell of an assumption you are making here Benny, that Japan *can* end Zirp I mean. I know the BoJ is trying, they’ve been trying for over a decade, and they haven’t really pulled it off yet. I think we should wait and see a bit here. Japan’s demographics – wages are rising coz they are running out of workers, and the ageing population is saving rather than spending – suggest there will be no early sustainable end to Zirp.

But this wasn’t your main point I think, your main point was that the US trade deficit, and a tendency to a weaker dollar vis-a-vis developing economy currencies wouldn’t apply to India, because India’s deficits mean the rupee will tumble. I don’t buy this, but you are entitled top your point of view. Now let’s see if it does. Theories need to be testable.

“Since both global and domestic economy is in shambles… ”

Well, it’s growing at circa 5% per annum at the moment, largely thanks to the developing econimes, so I would hardly call that a shambles. It’s more than we have ever seen before.

“So why this demographic discussion is taking place”

Because I for one think demographics are important, and normally neglected. You obviously don’t Again, you are entitled to your point of view. There *will* be more of the same I’m afraid.

Should have been

” our deficits will cause rupee to TUMBLE…prices of commodities to rise…”

Wow.. this sounds so wonderful… nice bed time story. Please let us more edward.

The reality is….

a.when Bank of Japan (BoJ) ends ZIRP, our stock market will almost die. There is no reason for anyone to give 16% PEs to useless stocks when global economy is slowing considerably

b.our deficits will cause rupee to appreciate and hence the prices too leading to more RBI rate hikes which will slow down the domestic economy too.

Since both global and domestic economy is in shambles… ALL THE INDIAs YOUTH will only be causing a revolt. There is nothing more going to happen.

Its OBVIOUS that wind blowing behind her is going to END. So why this demographic discussion is taking place (atleast once in a month – highlighting any artcle that comes out.)

I have mused about it before http://clausvistesen.squarespace.com/alphasources-blog/2006/4/28/indias-young-population-and-related-issues.html

Particularly this bit from a Boston Globe article seems to the point here …

‘India’s last census in 2001 revealed a sharp demographic divide between poorer northern states and economically advanced southern states, where there has been a sharp decrease in the rate of population growth in the last decade.

Experts say the demographic imbalances could fan regional tensions as people move from the poorer heavily populated areas to richer southern India. Imbalances could also fan political tensions. Last year, a leading Hindu hard-liner angered women and Muslims by pressing Hindus to have as many children as possible to avoid being swamped by Muslims.’

This issue simply needs to be reconciled along side the push for reforms if the demographic dividend is going to benefit India as a whole.

And this is also so very important I believe … this is a lingering phenomenon in India and it cannot be easily undone.

‘In fact, there is a much wider gap between the urban and rural Indias rather than the north and south, and bridging that gap may take a century.’

So in the end there are grounds on which to be both optimist and pessimist I guess.

Obviously not AK, obviously not. But India’s median age won’t be anything like 45 for another half century or so (while of course Italy, Germany and Japan are already pushing up to that threshold), so you have to take a very pessimistic view of India’s capacity for change if you don’t think the reforms can come over that time horizon. Personally I think they will come much sooner, maybe not tomorrow, but much sooner.

The demographics seem to tell us that India’s ‘big decade’ can be around 2015 – 2025. If you can get the health and educational issues (especially in the north) sorted by this time, you will have a lot of bright, healthy, energetic young people (remember nutrition in infancy and cognitive capacity are correlates) coming online at just the time there will be an increasing relative scarcity of such talent at a global level. But I absolutely agree, you need to get the reform end of things well and truly sorted.

“In a more mobile society as India has become, one wonders if there really be two countries for long.”

Good point. Looking at global population trends it is hard to see where international migration will be coming from – to feed eg the ‘growth machines’ of the developed world – ten to fifteen years from now. Latin America will dry up as a ‘feedstock’ for the US at some point, and it is hard to see China being able to leverage international migration due to culture (think Japan) and its sheer scale. But internal migration in China seems to be almost done, if you look at the labour market tightening that is going on. This has all been very rapid there.

“the knowledge workers from the North populating cities such as Hyderabad and Banagalore”

Yes, but we also need to be careful here. This can exaccerbate the ‘two India’s’ situation: think Krugman, increasing returns and ‘clustering’. You can have some dynamic high-value sectors grouped around one pole, and a lot of low value ‘poverty-related’ activities at the other. Again, Spanish experience is again interesting here, since with development educational equality has spread across all the regions, with university entrance rapidly approaching 50% of the young cohorts across the country, but the work for these graduates (apart from jobs in the public sector) is very much concentrated in the urban clusters of Barcelona and Madrid, with the consequence that internal migration of the highly educated is once more on the rise and regional differences are growing not reducing, especially in the ageing population context.

In fact, there is a much wider gap between the urban and rural Indias rather than the north and south, and bridging that gap may take a century.

The post referred to “global experience” as a guide. I firmly believe that broad trends are completely universal, and much of India’s future can be predicted by global experience. Of course, the micro changes will be more particular to India and much harder to predict.