India Is The New China: Investing In India's Demographic Dividend

Jan. 28, 2016 7:59 AM ETINXX, AMAT, AES, RDY, INFY, NOK, ERIC, MSI, LPL, PIN50 Comments


  • China's demographic boom is now calming down while India's is just starting.
  • India's population will be bigger than China's in 15 years and its working-age demographic bulge will be bigger and longer lasting than China's.
  • India's demographic dividend will add 2% to the GDP for several decades to come.
  • We investigate where to invest.

In a recent Seeking Alpha article How To Invest In The Upcoming Chinese Demographic Bust, we outlined how China's 'demographic boom' is winding down and turning into a 'demographic bust', and how this will permanently reduce China's GDP growth rate. We also identified several sectors that are set to counter the trend and actually grow as China's boomers age.

In this paper, we will address India's demographic landscape, identify the sectors that offer the greatest potential for profit from this demographic situation, and discuss the various risks that investing in India presents.

The Demographic Dividend

In the next four decades, the world's population is expected to increase by 2.4 billion people, with the majority of the increase coming from underdeveloped countries. The bulk of this increase is going to be in the 'working-age' cohort, 15 to 60 year-olds.

"This huge boost reflects a delayed demographic transition: declining infant mortality rates are being followed by falling fertility rates. Thus, with children more likely to survive into productive adulthood and fewer children being produced, the share of working age populations will increase." (Aiyar and Mody)

In other words, the ratio of 'working-age' to 'nonworking-age' will continue to increase in underdeveloped countries such as India. Since the working-age cohort is the population that produces, consumes, saves, and invests the most, India's increasing demographic ratio is expected to add 2% per year to the GDP growth rate for the next several decades. (Aiyar and Mody) This is what is meant by the "demographic dividend".

China and India, before the 1980's, had about the same wealth and population profiles, but starting in the 1990's, China's working-age ratio increased rapidly due to a number of factors such as China's "one child" policy, reduced infant mortality, and the effect of centralized planning and control. By the year 2000, this demographic shift had changed China's population pyramid profile

This article was written by

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An MMT-based analysis of the equity markets
I have a degree in Math and Science from the University of Toronto, as well as a degree in education, also from U of T.

During my 44-years of investing, I have come to understand that the only constants in the stock market are fear and funds (money), and that Modern Monetary Theory (MMT) provides the best description of how money moves through the economy.

In partnership with David Huston, we search for and analyze repetitive sentiment and fund-flow-based patterns in the stock market's price history, and offer a Marketplace service, Away From the Herd, that reports our findings and allows subscribers to replicate the trades we are involved in for our own accounts. My four decades of experience in the market have taught me to not trade "for the sake of trading". Identifying, and staying with the primary trend is key to wealth accumulation. We use a variety of investment instruments such as stocks, ETFs, and options to take advantage of opportunities as they arise.

Disclosure: I am/we are long PIN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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