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The United Nations estimates that India has now surpassed China as the world’s most populous country — or, as we colloquially say, the world’s “largest” country.

India’s population is also much younger. China’s population is concentrated in the 30-60 age range, while India’s people are mostly between 0 and 40:

This is world-shaking not just because of the sheer numbers of people involved, but because of the prospects that those 1.4 billion will become key contributors to the global economy and key actors on the stage of global politics, as China’s have.

...Agglomeration effects are pretty simple to understand. Companies want to be located close to their customers, workers, and suppliers. People — who are both workers and customers — want to be located close to their employers and to the companies that sell them stuff. And financial capital wants to send money to where companies are locating their factories and offices. Taken all together, these effects are a powerful reason that cities exist, and that economic activity clusters in certain countries. When you add in clustering effects — the tendency of companies in the same industry to locate nearby to each other — the effect on the concentration becomes even more powerful.

Agglomeration in a particular region tends to have a “break point”, where a rapid snowballing of economic growth suddenly comes into effect.

With production costs no longer low in China and geopolitical risk rising, multinational companies are going to be looking for alternative places to put their factories and offices. And those alternatives are likely to be in other parts of Asia, in order to be close to existing supply chains and manufacturing expertise and sources of capital. And India is really the only other part of Asia whose sheer scale has any hope of matching that of China.

Multinational companies are already starting to realize that. There’s a psychological barrier to break through — executives and managers are very used to putting factories in China, and very unused to the idea that they could put factories in India. But that barrier is now being broken, thanks to the world’s top global electronics company. Apple is starting to bet big on India, shifting production of a variety of products. In 2021, only 1% of iPhones were made in India; two years later, it’s approaching 7%, with a planned increase to 40-45%. Other companies are likely to follow in Apple’s footsteps; after all, if Tim Cook thinks India is a good place to make electronics, who are you to disagree?

But Apple has more reasons to invest in India than cheap costs and geopolitical stability. It’s being drawn in by the increasingly vast opportunity of India’s domestic market. IPhones have a very small market share in India right now, but it’s rising rapidly; it’s no accident that even as Apple opens factories in India, it’s also opening new stores. Having the country as a production base will make it much easier to sell to a billion new customers.

A billion new customers.