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India's GDP growth could overtake China within two years

Discussion in 'World Economy' started by Osiris, Aug 29, 2010.

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  1. Osiris

    Osiris Major SENIOR MEMBER

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    India's economic growth could match and surpass that of its fellow Asian giant China within two years.

    apital Economics Ltd. (CE) of London believes that India's second-quarter GDP, to be released on Tuesday, will be little changed in year-over-year terms from the first quarter, which will likely disappoint the market. However, any relapse in GDP growth in the second quarter is likely to be a pause rather than the start of a sustained downturn.

    Overall, CE forecasts that Indian GDP growth will accelerate to 9.0-9.5 percent in fiscal 2011 (April-March), from 7.4 percent in fiscal 2010. The official and consensus forecasts call for growth in the 8.0-8.5 percent area.



    Furthermore, CE holds that economic growth in India will remain above 9.0 percent annually beyond next year, while growth in its main Asian rival China should settle out at about 8.0 percent next year -- which means India could finally outperform China over the next two years.

    Similarly, Morgan Stanley also asserts that Indian GDP will grow faster than China’s by as early as 2013, buoyed by improving demographics, structural reforms and globalization.

    Morgan Stanley analysts Chetan Ahya and Tanvee Gupta wrote in the report that India’s economy will accelerate to a “sustainableâ€￾ rate of 9 percent to 10 percent by 2013-2015, after an average of 7.3 percent over the past 10 years. Morgan also thinks China’s GDP growth will slow to 8 percent by 2015 from about 10 percent on average over the past 30 years, .

    For the moment, India is rolling along nicely.

    "The [economic] recovery was led initially by government spending, exports, and inventory-rebuilding, but is adjusting to being driven by household expenditure and business investment," CE said. "We have no doubts at all that private sector spending will take over. But in [the] second quarter the fade in the initial drivers of the [economic] upswing appears to have been faster than the pick-up elsewhere."

    CE cites based on monthly data industrial output in India fell around 6 percent quarter-over-quarter in the second quarter, compared to the first quarter.
    On the output side, CE noted, growth in the services sector probably eased as well given the fiscal consolidation program.

    "The best performer in terms of the year-over-year change relative to [the] first quarter is likely to have been agriculture given the near-normal monsoon rains and increased crop production," the London-based research firm stated. "On the expenditure side, net foreign trade (exports
    minus imports) will have been a drag given the probable increase in the current account deficit."

    The contribution from government spending also likely slowed, while the increase in household spending was probably constrained by the acceleration in inflation.

    "However, business investment, which surged in first quarter, likely stayed very strong given the continued rapid year-over-year gain in the production of capital goods," CE indicated.

    Looking ahead in the near-term, CE expects that urban household incomes should climb rapidly while rural demand will be lifted by the more normal weather conditions.

    "Bank lending has also accelerated and, with consumer debt burdens still relatively low, there is plenty of scope for household borrowing to grow," CE noted. Vehicle sales have been strong and should stay impressive in coming quarters."

    In addition, CE cites that private sector investment should continue to grow at a rapid pace and that corporate profitability is high while the economic upswing is increasingly pushing against capacity constraints.

    "The ongoing heavy expenditure on infrastructure improvement projects will also lower costs and open up new business opportunities for the private sector," CE added.

    CE also said that inflation in India --which has been a concern -- has probably peaked and should slow further.

    "High crop production will ease the pressure on food prices. Moreover, stronger investment should increasingly reduce supply-bottlenecks and capacity constraints, which should keep a lid on non-food inflation," CE stated.

    Nonetheless, the Reserve Bank of India (RBI) still has a lot of work to do to ensure that inflation slows to its 6 percent target for March 2011.
    "We expect that the two key policy rates will both be increased by 25 basis points at the next RBI review in mid-September and that rates will rise a cumulative 100-125 basis points over the next 12 months," CE concluded.

    India's GDP growth could overtake China within two years - International Business Times
     
  2. Arjun MBT

    Arjun MBT Captain SENIOR MEMBER

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    India's economic growth could Overtake china's CURRENT Economic growth in 2 years.... This should be the proper Heading I guess, Buddy, Indian Economic Growth is not as fast as China, we are still second to them.... And Its not Possible to March ahead of them in just 2 years, we need to work harder, they already are in double digits, we still have to go a long way to catch that 11 or 12 percent which they would have in the next two years....

    Anyways India sure is Unpredictable, we could come up with a sudden growth aswell
     
    Last edited: Aug 29, 2010
  3. RoYaN

    RoYaN Lt. Colonel ELITE MEMBER

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    We are not that far behind them considering that we stared the Economic reforms 20 years after them.
     
  4. Arjun MBT

    Arjun MBT Captain SENIOR MEMBER

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    Well thats why there economy is double that of Ours, anyways if we see by growth yes China at present has an Upper Hand over us, But Iam no economic Expert to make a statement about this.... Lets stand by our economists...
     
  5. RoYaN

    RoYaN Lt. Colonel ELITE MEMBER

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    Indian economy is more in to meeting the demands of its population and less dependent on exports so it is less susceptible to foreign economic melt downs.
     
  6. Speaker

    Speaker FULL MEMBER

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    That may have been in the past. China has started to focus on domestic demand to reduce its dependency on foreign markets. They took a pretty bad hit during the 2008-09 recession. Like us, they have sufficient under developed cities to keep demand high for many years to come.
     
  7. RoYaN

    RoYaN Lt. Colonel ELITE MEMBER

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    I was talking about India and not china.
     
  8. prototype

    prototype Major SENIOR MEMBER

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    no actually,its not 'could',it's definitely 'will'

    the reasons r many

    first of all once ur GDP, reaches a particular position ur growth rate automatically start to slow down,for example achieving a growth of 10 percent over a gdp of $4trillion is not as easy as achieving the same growth over $1 billion,their r no hard and fast rules to prove that,but if u will have a look at the growth of some other nations they show the same scenario,U.S,Japan and Germany,each and every nation's growth tumbled after a particular position(population factor in Japan's and Germany's case)

    Again we make all the prediction's abt of size of economies as abt their position some time after and the growth rate of all the yrs in between is mostly based on IMF's prediction,the problem is that IMF only take current economic condition as a factor,and predict on the same rate,they where unable to foresee a lot of factors during the past yrs which had affected the economies of any nation's for example fall of Soviet,U.S sub prime loan crisis and euro crisis

    Now take into consideration some of the current facts,first of all in case of FDI,south China at present is heavily loosing to Vietnam due to the presence of much better infrastructure(as an avg)and their Govt's more cooperative policies

    Other factors which had by now started to haunt China is the workers strikes,increased value of Yuan and increased wages,moreover with the ever improving infrastructure of India which act as a more cheap market than China have slowly started to rise as the world's new factory
     
  9. Guynextdoor

    Guynextdoor Lt. Colonel SENIOR MEMBER

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    Crossing the chinese GDP grwoth rate or even matching them in absolute terms is of no consequence. The Per Capita of the average Chinese today, if I'm not wrong is somewhere around USD 4000? While that of Singapore is around some $20,000? We've gotta get up and realize that while china has a great place in the world economy because of it's sheer size, it cannot be our benchmark because in terms of inidivdual prosperity there are many countries five or six times ahead. Sure tryong to match teh chiense will be good because they are very competitive and our establishment really needs a kick in their pants to work (which the chinese always seem to manage to do) but things stop there. Let us benchmark higher...WAY higher.
     
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