With the established western global powers facing irreversible relative decline, India has several important attributes that should enable it to become a global leader in the 21st century. But the country also has a major Achilles? heel: its dysfunctional system of education. Fixing this should be a top priority for India?s next government, but the task will be huge.

Four big things should work in India?s favour during this century.

One is its distinct demographic advantage over not only the western powers but also India?s BRIC peers. Russia and China are ageing fast and, by 2040, will have populations with average ages of 46 and 44, respectively. India, with an average age of 35 in 2040, will retain a youth dividend of a decade. Thus, in the race between China and India, as Indians are fond of saying, ?the Chinese may win the sprint, we will win the marathon?. Furthermore, whereas Brazil?s population will peak at 231 million in 2050 and thereafter decline, India?s population is projected to continue growing till 2070.

Second, India is a democracy. And while many lament that its rambunctious nature hinders growth and development?compared to China, where top-down decision-making appears effective?history suggests that, in the long run, democratic regimes are more sustainable. One can quite confidently predict that, in 2050, India will still be a democracy, whereas what kind of regime China will have by then is an open question.

The third advantage is, taking the title of Amartya Sen?s masterpiece, the culture of the ?argumentative Indian?, complemented by a very high degree of heterogeneity. India is a hotbed of creativity and ideas?though implementing them remains a challenge.

Finally, English is likely to remain the global lingua franca for decades?if only because there are so many millions of English language teachers on the planet. The fact that English is an Indian ?native? language gives the Indian elites a significant advantage. Japan?s global ascent, for example, was in part constrained by its linguistic limitations.

However, this vision of India as a global leader will be little more than hallucination without greater investment in human capital and a much more robust educational system.

These were key to the admirable accomplishments of the East Asian ?miracle economies??Japan, South Korea, Taiwan, Hong Kong, Singapore and more recently China. Illiteracy in these countries was, by and large, eliminated at an early stage of development. And their educational pyramid is solid, with inclusive and high quality primary and secondary education and a tertiary sector that caters to the needs of industry and the broader economy.

The Indian educational system stands out in quite shocking contrast. Public primary and secondary education systems are poor, and illiteracy rates, although declining, are still appallingly high. With an adult literacy rate of roughly 63%, India is an under-performer even compared to other lower middle-income economies. The base of the educational pyramid is weak and, as a consequence, the intake at tertiary level is mixed in terms of quality.

At the tertiary level there is a bit of everything: the outstanding, the good, the bad and the ugly. The best of the best schools produce some of the world?s brightest brains, but given the lamentable state of the rest of the education system, the chasm between the intellectual elites and the semi-literate or illiterate masses remains wide. In short, the first major challenge for the next government has to do with the overall quality of the Indian educational system.

In terms of sheer numbers, Indian universities churn out millions and millions of graduates, but gross enrolment ratios remain quite low (16%) and too many graduates are deemed unemployable. Moreover, no Indian university is classified among the top 200 in the world.

Since robust and competitive industries will be essential to ensure India?s sustained growth and development, its universities need to provide graduates who meet these needs. As the numbers of college candidates swell in tandem with the Indian youth dividend, the challenge will become even bigger. Accordingly, the new government?s other priorities for educational reform should be to dismantle regulatory barriers to entry in the sector (for example, by reforming institutional gatekeepers such as the University Grants Commission) and to liberalise tuition fees, a necessary step for Indian universities to compete in attracting good teachers.

The challenges in implementing such reforms are immense, but an Indian ?miracle? would do wonders not only for alleviating poverty on a global scale, but also for unleashing new sources of ideas and innovation.

Jean-Pierre Lehmann & Carlos Braga

Jean-Pierre Lehmann is emeritus professor of International Political Economy at IMD, founder of The Evian Group@IMD, and visiting professor at the University of Hong Kong and NIIT University in India. Carlos A Primo Braga is professor of International Political Economy at IMD and director of The Evian Group@IMD