China's affluence aim may be a bit rich

China's population has begun to decline earlier than anticipated, increasing the odds of the country becoming old before it becomes rich. The demographic crisis has its roots in a population control programme that refused to reverse course, socially engineered gender bias and high costs of skilling labour. The rapidly ageing Chinese population draws the boundaries on the country's development model based on wage arbitrage and a rising social security bill threatens to eat into further productivity gains of its labour pool. This makes China less attractive to foreign capital as the factory to the world and widens the field to other nations with similar demographic endowment. India is an obvious choice with a growing labour pool and a newly acquired policy focus on manufacturing exports.

Yet, India shares with China some of the principal issues in population policies. Control measures have led to irreversible declines in fertility rates, healthcare has not lowered death rates adequately and costs of education remain a barrier to fertility. India's population hump will replicate that of China with a lag. The economic dividend of following the Chinese development model will be self-limiting, trapping both economies in the middle-income order. India, of course, is yet to make the transition from low to middle income, so it makes sense to follow in China's footsteps.

A third of the world's population is unlikely to experience mass prosperity. With population decline in prosperous nations, what was touted as the Asian century could witness a rise in income inequality although poverty would have been mitigated on a global scale. The population issue is fundamental to both China and India and has not received the attention it merits. Since India is behind on the curve, it can avoid some of China's missteps. Stabilising the growth rate after hitting peak population is essential for an affluent society.