India has the potential to be the fastest growing large economy in the world over the period to 2050, says a report published by PwC today.
This is one of the conclusions from the latest in the series of PwC’s ‘The World in 2050’ reports. The most significant increases in share of world GDP at Market Exchange Rates (MERs) are projected to be achieved by India. In 2009, India’s share of world GDP at MERs was just 2 per cent. By 2050, this share could grow to around 13 per cent according to the findings of the report.
On the findings of the report, Jairaj Purandare, regional managing partner and leader – markets & industries, PwC India said “The global financial crisis has further accelerated the shift in economic power to the emerging economies. India, helped by its strong demographic dividend, is poised to overtake the US to emerge as the second largest economy in purchasing power parity terms by 2050. Over the coming decade, the Indian economy is likely to become less dependent on outsourcing and more focused on manufacturing exports, building on its strong engineering skills and the rising levels of education of its population.”
India’s trend growth is expected to overtake China’s trend growth at some point during the coming decade due to India having a significantly younger and faster growing working age population than China and due to it having more potential for growth as it is starting from a lower level of economic development than China and so has more catch-up potential.
However, the report says India will only fully realise this great potential if it continues to pursue the growth-friendly economic policies of the last two decades. Looking ahead, particular priorities will be maintaining a prudent fiscal policy stance, further extending its openness to foreign trade and investment, significantly increased investment in transport and energy infrastructure, and improved educational standards, particularly for women and those in rural areas of India, report said.
In the course of this process, the drivers of growth are likely to change. India is likely to become less dependent on outsourcing and more on manufacturing exports, building on its strong engineering skills and rising levels of education in the general population over the next decade. Consumer markets in major Indian cities will also become increasingly attractive to international companies as the size of the middle class there grows rapidly over time.
John Hawksworth, chief economist, PwC UK, said: “In many ways the renewed dominance by 2050 of China and India, with their much larger populations, is a return to the historical norm prior to the Industrial Revolution of the late 18th and 19th centuries that caused a shift in global economic power from Asia to Western Europe and the US – this temporary shift in power is now going into reverse.”