China’s decades of double-digit growth transformed the global economy, providing the world with cheap goods and capital. Over the 40 years from 1978 to 2018, the Chinese economy grew by an average of 9.4% per annum, lifting hundreds of millions out of poverty. An astonishing achievement.
But today, the combination of demographic ageing, a deep structural property slump, protectionism from the West and inevitable slowing off a much larger base means the super-high growth phase of China’s expansion is probably in the past.
Now, following its overtaking of China in the population stakes late last year as the world’s most populous country (with more than 1.4 billion people), we are looking to India to pull off a growth miracle of its own.
India’s $3.5 trillion economy is still dwarfed by the $17.8 trillion giant that is China. But India is well set for years of catch-up growth that could see it emerge as one of the world’s main growth engines, if not the largest.
Bloomberg Economics forecasts that India can reach that milestone by 2028 on a purchasing power parity basis if it hits key goals in four crucial development areas:
- building better infrastructure;
- expanding the skills and participation of the workforce;
- building better cities to house all those workers; and
- luring more factories to provide them jobs.
In Bloomberg Economics’ base case scenario, India’s economy will accelerate to 9% growth per annum by the end of the decade, while China will slow to 3.5%. That puts India on course to overtake China as the world’s biggest growth driver by 2028. Even in the most pessimistic scenario – in line with the International Monetary Funds (IMF) projections for the next five years in which growth stays below 6.5% – India overtakes China’s contribution in 2037.
If Indian policymakers can build more homes in better functioning cities and get more people trained and into the manufacturing sector, the country is ideally placed to be the largest contributor to world economic growth.
Source: Bloomberg Economics
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