Provideo Financial Reports Why India Will Overtake China As The World's Fastest Growing Economy

Provideo Financial analyst agrees that India's economic growth will overtake China's in the next 3 years.

Over the past 10 years the world has witnessed the emergence of economies that were previously unthought-of; notably China, India, Brazil, and Russia. The massive populations and potential of these nations has fuelled impressive growth even in the face of global recession, financial crises and economic turmoil. Over the first decade of the twentieth century China has emerged as the clear leader of the emerging economies of the world, but despite its dominance and seeming invincibility, there are a few reasons why India may be stronger over the next 10 years.

Analyst Lee Jacobs of Provideo Financial in Hong Kong agrees with the position of other analysts including those from Morgan Stanley, Standard Chartered and Goldman Saches who all predict that India's economic growth rates will surpass China's sometime in the next 5 years. Jacobs specified his prediction:

"China will likely continue along its current path and lead the world in economic growth at least into 2012 or 2013 when its growth will likely begin to plateau. Their growth has been fuelled primarily by manufacturing and exports however it will soon become a political impossibility for this trend to continue, and India will likely pick up the slack."

India, who is just now committing to the massive development of its infrastructure, will be entering into a growth phase similar to what we have seen in China over the last decade and a half. Between 1996 and 2005 China spent 8.2% of GDP on infrastructure while India spent only 4%. Between 2007 and 2012, India has committed 7.5%, and between 2012 and 2017 the government has pledged to commit 9% of their GDP to infrastructural development. This will help economic growth both by the creation of jobs as well as providing infrastructure that will enable the nation to efficiently transport goods and compete with China as a manufacturing powerhouse.

In addition to the timely development of their infrastructure, India also benefits from a stronger workforce. China is the fastest aging society in the world. As a direct result of their one child policy, their median age is 34.2 years old compared to 25 years old in India. China's dependency ratio will continue to grow over the next 30 years, while India's will continue to decline.

As India improves their infrastructure, China will reach a limit of an acceptable share of the world's trade. Massive importers including the Europe and the United States will no longer be able to allow China to continue along the same path, and India will become the logical alternative. Between 2000 and 2010, China's exports grew over 20% per year which was double the global trade growth rate. Over the same period their share of global trade increased from 4% to 10%. If this trend were to continue for more than a few more years, China's export share would reach unacceptable levels to Europe and the United States who will preclude this growth by reaching out to other exporters; notably India.

"This analysis is by no means predicting the demise of China. On the contrary. China will continue to grow, and its domestic demand will pick up the slack to continue positive economic growth over the next 25 years. However, it is my belief that during that time India will experience a renaissance similar to what we witnessed in china over the past 10, and as an investor this is very enticing." - Lee Jacobs


Contact Details

Company Name: Provideo Financial
Issued By: Allison Williams
Website: Visit the website

by Allison Williams (few years ago!)

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