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Why India might overtake China

July 18, 2008

It has only been a few years since Asia bulls have been touting the arrival of the Chinese Century, citing that nation's enormous potential.

Now, get ready for predictions of the India Century.

That, in fact, was the title of a recent white paper by the Chicago-based consultancy Keystone-India, founded by a group of top economists from Ernst & Young who believe that India is on track to surpass China in growth. "We believe this is India's moment," declares Keystone Chief Economist William T Wilson.

China has a two decade-long track record of 9.5% average annual growth, exports 10 times as much as India, and dwarfs India as a magnet for foreign investment.

By contrast, India has achieved an annual growth rate of 7% or higher only seven times in the past two decades. And largely because of its unruly politics and stifling bureaucracy, it wasn't long ago that economists bemoaned the "Hindu growth rate," implying the nation is simply culturally incapable of achieving high growth.

Even under Keystone's projections, India wouldn't match China's current hypergrowth rates for at least another 15 years. And even by 2050, China's economy would be bigger measured in US dollars.

But longer term, Keystone contends India will be in a stronger position. It projects that China's average annual growth will peak at 8.8 per cent over the next five years, and then gradually trend downward to under 7 per cent in the 2020s and around 4% by the 2040s.

India's annual growth is projected to rise to around 7.3 per cent by 2010 and stay over 7 per cent until the mid-2030s, and still be in the 6% range until 2050.

What's more, Wilson contends that Keystone's forecasts are conservative. Read on...

Excerpted from: Chindia-How China and India are Revolutionizing Global Business by Pete Engardio. Reproduced with permission from Tata McGraw-Hill Publishing Company Limited. Price: Rs 395. Copyright 2008.

Image: Cover of the book Chindia-How China and India are Revolutionizing Global Business by Pete Engardio

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