In what could turn out to be a prescient study into the changes the world economy is undergoing, PricewaterhouseCoopers (PwC) has come out with a report that reorders the economic landscape of the global economy. Consolidating on the Goldman Sachs’ BRIC coinage the consultancy cum auditing firm’s report, The World in 2050: Beyond the BRICs, identifies 20 emerging economies having the potential to grow significantly faster than the Organisation for Economic Co-operation and Development (OECD) member economies.In the most significant finding of the report, PwC projected that China would overtake the US in around 2025 to become the world’s largest economy and would keep on the momentum to reach around 130 per cent of the size of the US economy by 2050. In comparison, its projections for India are a bit tempered in the sense that India is expected to grow to almost 90 per cent of the size of the US economy by 2050.By the same time-mark Brazil seems likely to overtake Japan to move into fourth place behind China, US, and India, while Russia, Mexico and Indonesia have the potential to have economies larger than Germany or the UK.“The global centre of economic gravity is already shifting to China, India and other large emerging economies and our analysis suggests that this process has a lot further to run”, said John Hawksworth, head of macroeconomics at PwC LLP. In fact, the report concluded that long-term prospects for China, India and other so-called E7 economies (Brazil, Mexico, Russia, Indonesia and Turkey) were still upbeat.While the report rules out the demise of the established OECD economies due to these changes, it avers that the changes should prove to be a boost for them through growing exports and overseas investment opportunities. “But while the macroeconomic story should be ‘win-win’, at the company level there are likely to be both winners and losers from the process of adjusting to this new world economic order”, it added.Interestingly, India has emerged at the second place of the GDP growth table, behind top-ranker Vietnam and much ahead of China, prepared by PwC. India’s GDP is currently growing at 8.5 per cent and is expected to slowdown to 5.8 per cent by 2050, but still remain ahead of other emerging and developed economies.China’s GDP is forecast to grow at 4.7 per cent in 2050 from 6.8 per cent in 2007. It is followed by Indonesia, which is expected to grow at 4.5 per cent by 2050 as against 6.7 per cent in 2007.“Other emerging economies with relatively younger, faster-growing populations include Indonesia, Brazil, Turkey and Mexico. As with India, the key to them achieving the growth potential indicated by our mode would be establishing and maintaining a macroeconomic, legal and public policy environment conducive to trade, investment and hence economic growth,” the PwC report said. India is expected to move ahead of China in terms of growth in GDP due to several factors, mainly the significantly slower labour force growth in China due to the rapidly ageing population over the next 45 years, a result of its one-child policy.While India’s working age population is projected by the United Nations to continue to grow at a healthy rate. Other factors favouring India is the fact that average productivity and education levels across the population are currently lower in India than in China, giving the former greater scope to catch up with the OECD countries in the long run, provided that it can maintain the right kind of institutional policy framework to support economic growth, the report said.Besides, China’s growth to date has been driven by very high savings and capital investment rates, but experience with Japan and other earlier Asian tigers suggests that such investment-driven growth eventually runs into diminishing returns once income levels approach OECD levels.
