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India's GDP may exceed all expectations next year as there are signs that policymakers might spring up positive surprises, Goldman Sachs has said.
"India in many ways remains the most complex of the four (Bric nations), with its demographics giving it the best potential GDP growth rate, but its inability to introduce effective policy change is a persistent source of disappointment" leading international fund house Goldman Sachs asset management chairman Jim O'Neill said.
"This being said, there are lots of policy changes being discussed and the Indian stock market seems to be quite excited about something.
"We think 2013 Indian GDP will probably exceed expectations, as there are indeed signs that policymakers might also positively surprise," O'Neill said in a research note, but did not put any figures to his estimates.
Reserve Bank Governor D Subbarao last week said he is expecting inflation to trend down starting the fourth quarter (of the fiscal year ending March 31, 2013).
"As we go into our mid-quarter policy on December 18 and the quarterly policy on January 29, we will take into account the growth-inflation trajectory and calibrate our monetary policy accordingly," he had said.
While growth has taken a massive beating, inflation is still much above the RBI's comfort level of 5 per cent, despite 13 successive rate hikes between March 2010 and October 2011.
Belying some expectations of recovery, India's economic growth had slipped further in the July-September quarter to 5.3 per cent, raising fears that the slowdown may pull down the annual growth rate to the decade's low level.
The country's gross domestic product (GDP) was 5.5 per cent in the April-June quarter of 2012-13 fiscal. It was 6.7 per cent in the July-September period of the previous fiscal.
India had been growing around 8-9 per cent before the global financial meltdown of 2008. The growth rate in 2011-12 slipped to 9-year low of 6.5 per cent.
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India is likely to emerge as the world's third-largest economy by 2030 and grow faster, on an average, than China over the next two decades, says the Standard Chartered report India in the Super Cycle. However, regulatory burden, infrastructure bottlenecks, high oil prices and slowdown in foreign direct investment could affect growth.
The world may be experiencing its third 'super-cycle', which is defined as "a period of historically high global growth, lasting a generation or more, driven by increasing trade, high rates of investment, urbanisation and technological innovation, characterised by the emergence of large, new economies, first seen in high catch-up growth rates across the emerging world," Standard Chartered said.
The third supercycle, the report says, is led by India and China and other emerging economies, shifting the balance of economic and financial power from the West to the East. The winners of the supercycle would be those countries which have abundance of cash or commodities. Currently, the Indian economy is expected to grow at about 9%, however, the rising inflation poses a risk to growth. In 2010-11, the central bank has raised key policy rates eight times.
India has the fundamentals to emerge a winner in the super-cycle, potentially becoming the world’s third-largest economy by 2030... India is likely to grow faster, on average, than China over the next two decades," Standard Chartered Global Research said in 'India in the Super Cycle.
In 2010, the world's major economies were USA ($14.6 trillion), China ($5.7 trillion) and Japan ($5.4 trillion). India did not figure among the top ten, as per International Monetary Fund data.
By 2030, StanChart said India will be at number three position with an economy of $30.3 trillion, behind China ($73.5 trillion) and US ($38.2 trillion).
It said that the country's demographic advantage, with half its population below the age of 25 years, with rising per capita income will ensure strong domestic demand.
"India has many of the features that will enable it to emerge as a winner in the super-cycle. We believe the winners will be those countries which have cash, commodities, or creativity, or a combination of these factors. India does not have an abundance of cash or commodities, but it has creative potential," it said.
StanChart said India has potential to catch up with China and the developed world.
Based on our forecasts, India's nominal GDP could top $30 trillion by 2030, against its current level of around $1.7 trillion. By 2030, India could be 8.4 times bigger than it is today, while China is estimated to grow 4 times bigger and the EU and US 1.7 times," it said
Often, consensus views of India's growth potential turn out to be too pessimistic. Thus, trend growth has often been assumed to be lower than that which materialises... Taking all of these factors together, our 9.3% projection for average Indian growth until 2030 may prove conservative. Trend growth, in my view, could even be nearer 12-13% a year," it said
By Super-Cycle, StanChart refers to the major periods of global economic growth
The first super-cycle took place from 1870 till the eve of the First World War in 1913 and saw the USA jumping from the fourth position to become the world's largest economy
The second super-cycle was from the end of the World War-II in 1945 and lasted till early 1970s and saw emergence of Japan and the East Asian economie.
According to StanChart, the third super-cycle, which is currently in progress and has touched Asia, Middle East, parts of Africa and Latin America could transform the world economy over next few decades.
China is likely to overtake the US to become the world’s biggest economy over the next decade... We factor in a trend rate of growth of 6.9% for China, allowing for setbacks along the way, and of 9.3% for India," the report said.
Among the positive features of the Indian economy, StanChart listed a balance between consumption and investment and strong macroeconomic management. It listed infrastructure shortage, public health care and vulnerability to global oil prices as the major challenges for the country.
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Surpassing China, India will become the world’s largest economy by 2050, says a report.
“China will overtake the US to become the world’s largest economy by 2020, which in turn will be overtaken by India in 2050,” according to Wealth Report 2012 by Knight Frank & Citi Private Bank.
According to the report, the Indian economy will reach a size of $85.97 trillion in terms of purchasing power parity by 2050, while the Chinese GDP would be $80.02 trillion during the same period.
The US — currently the world’s largest economy — is expected to have a GDP of $39.07 trillion by 2050.
Other nations in the top ten list of world’s largest economies would be Indonesia (4th), Brazil (5th), Nigeria (6th), Russia (7th), Mexico (8th), Japan (9th) and Egypt (10th).
In terms of growth from 2010-2050, India would be the second fastest with its economy growing at the rate of eight per cent in the period.
With a pace of 8.5 per cent, Nigeria would be the fastest growing economy during the same period, the report said.
In 2010, India was the world’s fourth largest economy with a value of $3.92 trillion compared to China’s $9.98 trillion and America’s $14.12 trillion.
The report named Surat and Nagpur among the fast-growing cities to watch in 2050.
“We believe the cities to watch in 2050 are the 400 emerging market middleweights — fast growing cities with populations between 200,000 and 10 million.
“This dynamic group includes many cities that are not household names today: Linyi, Kelamayi and Guiyang in China; Surat and Nagpur in India; Concepcion and Belem in Latin America,” it said.
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