India is likely to become the worlds largest economy worth $85.97 trillion in a matter of just 40 years,surpassing China and the US.
China should overtake the US to become the largest economy in the world by 2020,then be overtaken by India by 2050, said a report by financial services group Citi on Global Growth Generators.
The estimates are based on purchasing power parity (PPP),an economic growth indicator that takes into account the purchasing power of each countrys currency,instead of the prevailing exchange rate conversion. According to the report,Indias real per capita GDP is likely to grow at 6.4 per cent annually over the 40-year period between 2010 and 2050. While by 2015,it will overtake Japan to be the third largest economy in the world,it would surpass the US to become the second largest by 2040. India is truly an emerging markets economy as regards the sectoral composition of its production and labour force, the report said but added that Indias assets are many.
The Indian economy will shine owing to its huge demographic dividend,high savings rate and education system. Indias population of working age is expected to grow by 40.7 percent between 2010 and 2050, it said.
The report further notes,Its education system,while not without weaknesses,produces a large pool of cheap,internationally competitive,English-speaking graduates,allowing India to build up a comparative advantage in certain sectors,such as IT or business processes. However it has cautioned that for India to actually realise this forecast it will have to ensure that its working population is educated and trained as well as to create a large number of productive jobs. The report has also stressed on the need to improve the countrys infrastructure,improve its attitude to foreign direct investments as well as overhaul its education system.
India has to move from a position of educating a limited number of youngsters very well but not the majority (especially females in rural areas and the lower castes almost everywhere) to one of educating all its youth properly, it said.
The report has also called for a further round of deregulation of the domestic economy and further trade liberalisation. Pricing water,energy and other resources at full marginal social long-run cost,at least for all producers is also essential.
But,while India may top in terms of GDP by 2050,the growth may not be very inclusive as it does not find a place in the top countries on the basis of GDP per capita. India starts way below the frontier: it ranks 54th in real per capita GDP,at $3298 in 2010. Citi has pointed out that North America and Western Europes share of worlds real GDP (in terms of USD calculated on PPP basis) is expected to fall from 41 per cent in 2010 to just 18 per cent in 2050.