It’s official, sort of. After 20 years of breakneck growth, China is going to pass the title of the world’s fastest growing big economy to India this year.
New projections out of New Delhi Friday confirmed that the government expects gross domestic product to grow by over 8% next year, rising to over 10% in subsequent years (albeit, the government’s fiscal year runs from April to April, rather than being a calendar year).
Delhi’s forecasts come as China’s growth is slowing down, as the authorities switch their emphasis from export-oriented manufacturing to more domestically- and service-based activities. However, China’s economy remains more than twice as large as India’s, meaning that it, rather than India, will remain Asia’s powerhouse for the foreseeable future.
“India has reached a sweet spot—rare in the history of nations—in which it could finally be launched on a double-digit medium-term growth trajectory,” the government’s Economic Survey said. “This trajectory would allow the country to attain the fundamental objectives of ‘wiping every tear from every eye’ of the still poor and vulnerable, while affording the opportunities for increasingly young, middle-class, and aspirational India to realize its limitless potential.”
The survey is traditionally a document that forms the basis for the country’s annual budgets, and the latest edition, penned by the internationally-respected economist Arvind Subramanian, urged Finance Minister Arun Jaitley to use the favorable conditions to deliver the bold reforms promised by Prime Minister Narendra Modi in his election campaign last year.
India’s growth slowed significantly after the financial crisis but has appeared to recover in the last year on optimism that Modi will make the country more open to investment and cut bureaucracy. However, he has struggled to deliver much in the way of reforms so far, and much of the improvement in the economy appears more down to the collapse in world oil prices, which has helped cut its troubling current account deficit.
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