India could be fastest growing economy by 2050: PwC
January, 14th 2011
How will India fare against China in the next few decades? That's a question often asked, and rarely meets with the same response. The latest organisation to pitch in is PricewaterhouseCoopers (PwC), with a particularly bullish outlook for the next three decades.
In The World in 2050, published on Friday, PwC forecasts that India could be the fastest growing large economy in the world over the period to 2050, with its share of global GDP, measured at market exchange rates rising to around 13 per cent, from 2 per cent in 2009 of the world economy. PwC argues that thanks to India's younger and faster growing working age population, India's growth rate will overtake China during the coming decade.
That could mean that by 2050, India will overtake all G7 countries, save the US, to become the world's third largest economy, with a projected GDP of $31,313 billion. China, currently the world's third largest economy, will move to the No. 1 spot by 2040, with an estimated GDP of $51,180 billion by 2050. The renewed dominance of China and India is a return to the historic norm prior to the Industrial Revolution of the late 18th and 19th centuries that caused a shift in global economic power from Asia to Western Europe and the US, said John Hawksworth, chief economist at PwC. This temporary shift in power is now going into reverse. India, China and the US will account for a staggering 50 per cent of the world GDP.
Measured by purchasing power parity, which takes account of differing prices of goods across the world, India's performance is even stronger. PwC estimates that India will overtake the US to become the world's second largest economy.
However, the projections are qualified by a political message. PwC warns that India will only achieve this performance if it maintains a prudent fiscal policy, and continues to open up to foreign trade and investment, and further invest in transport and energy infrastructure, and education.
While India's growing young population will spur its growth, China's rapidly aging population will lead to its rate of gain on the US declining though it won't stop the Chinese economy being 35 per cent larger than the US by 2050. Russia will also be adversely affected by its shrinking working age population, and will be the slowest of the E7 countries.
Bleak outlook for G7
The report provides a strikingly gloomy picture for the G7 nations of France, Germany, Italy, Japan, the UK, US and Canada. The combined economies of the so-called E-7 group of countries, comprising India, China, Brazil, Mexico, Russia, Indonesia and Turkey, will be 64 per cent larger than the G7 by 2050.
Among the countries likely to see the biggest falls is Australia, which could fall off the top 20 ranking (measured by purchasing power parity) by 2050, with both Nigeria and Vietnam making it onto the list at that time.
Part of the problem for G7 nations is their dependence on European and American export markets. The fall of Britain in the rankings, from sixth to ninth position (measured by MER), is accentuated by its over-dependence on the EU and US as trading partners. The UK might do somewhat better than our projections suggest if it can fully seize the opportunities provided by the fast-growing emerging markets, concludes the report.