Economic growth in India will overtake that of China in the next ten years, boosted by huge domestic demand, said noted global economist Nouriel Roubini.
“In the next few years, it is possible that the growth of India might surpass that of China, with India maintaining a close to double-digit growth, while China might slow down to eight per cent or so,” said a Business Standard report on Friday quoting Roubini.
A similar prediction was made by Morgan Stanley which asserted 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 “sustainable” rate of 9 percent to 10 percent by 2013-2015. Morgan also thinks China’s GDP growth will slow to 8 percent by 2015.
Roubini, who is known for his prediction of global financial crisis, said that India’s increasing dependence on domestic demand for economic growth has a distinct advantage over China, as the world’s second largest economy mainly depends on exports.
“As far as sustaining growth is concerned, China will have more challenges than India. Their economy is characterized by dependence on the US as the consumer of first and last resort, a mode of growth that has been challenged today,” he added.
India’s GDP grew 8.9 percent in the July-September quarter, beating expectations of growth of 8.3 percent. The economy had growth 8.8 percent in the previous quarter.
However, India faces challenges in dealing with the structural problems that lead to high inflation, he said.
High inflation rates have been plaguing India for the past several months. Food rate inflation is currently around 10.15 percent for the week ended Nov. 13. Overall inflation stood at 8.58 percent in October.
In its efforts to tame inflation, the Reserve Bank of India (RBI) raised its short-term borrowing and lending rates by 25 basis points in November, the sixth time to do so.
Roubini also advocated faster privatization of public sector companies in the country to increase competition and efficiency.
Roubini is also positive over the recovery in the Asian region while expressing concerns over the growth in the western developed economies. He stated that developed nations will witness slow recovery citing reasons as high budget deficits, falling incomes and stagnating productivity.