Lyric discussion by ginteardrops 

Cover art for Come Dancing lyrics by Kinks, The

I think HydrolicToaster is right. Even if you look in the video, it seems they chose a child to look like a young Ray Davies. I think it could be a reflection on his own childhood, and he is talking about one of his older sisters. There were 5 of them, so I'm not sure which.

You NAILED IT. The idea of losing your closest sibling at a young age is nearly impossible for most people to imagine (especially because so many two-earner households only have one trophy-child to begin with). He CLEARLY wrote this song for her and how much it hurt him to lose her.