Tagging India as a country of "endless unrealised potential", a US-based strategic think-tank today said that the south Asian country's growth would be "unpredictable and uneven" in the decade starting 2010.
"India will grow, but in a wildly unpredictable and uneven manner; the fantastic expectations will not materialise," global intelligence agency 'Stratfor' said in its forecast, which also said that China will face recession while the US would remain the lone world superpower.
"India has always been a country of endless unrealised potential, and it will remain so in the 2010s. Its diversity in terms of regulations and tensions, its lack of infrastructure and its talented population will give rise to pockets of surprising dynamism," it said in its 'Decade Forecast: 2010-2020'.
"Because the Himalayas protect India from China, New Delhi's primary strategic interest is Pakistan. We expect Pakistan to muddle through. It is just important enough that outside powers will prevent its collapse, but it does not have the internal resources needed for stability," Stratfor said.
In its prediction, the US think-tank said Egypt will become a regional power alongside a surging Turkey; the US-Jihadist war will have to subside, with Iran pacified by military action, isolation and/or political agreement.
Stratfor said global demographics will shift, causing world-wide labour shortages and increased demand for immigrant labour.
"The US-jihadist war is in the process of winding down. It will not go away, but where in 2005 it defined the dynamic of the global system, it is no longer doing so. China has not yet faced its Japan-style crisis but we continue to forecast that it will -— and before 2015," it said.
Russia has already shifted its policy from economic accommodation with the West to geopolitical confrontation. And the US, buffeted on all sides by coalitions forming around political and economic issues, remains the dominant power in the international system, the intelligence agency said.
China's economy, Stratfor said, like the economies of Japan and its other East Asian neighbours, will reduce its growth rate dramatically in order to calibrate growth with the rate of return on capital and to bring its financial system into balance.
To do this, it will have to deal with the resulting social and political tensions. In fact, China faces a quadruple bind, it said.
First, China's current economic model is not sustainable. That model favours employment over all other concerns, and can only be maintained by running on thin margins. Eventually, manufacturing margins turn negative as they did in Japan in 1991 and Indonesia in 1998.
Second, the Chinese model is only possible so long as Western populations continue to consume Chinese goods in increasing volumes. European demographics alone will make that impossible in the next decade.
Third, the Chinese model requires cheap labour as well as cheap capital to produce cheap goods. The bottom has fallen out of the Chinese birthrate; by 2020 the average Chinese will be nearly as old as the average American, but will have achieved nowhere near the level of education to add as much value.
The result will be a labour shortage in both qualitative and quantitative terms, it said.
Finally, internal tensions will break the current system. More than 1 billion Chinese live in households whose income is below $2,000 a year (with 600 million below $1,000 a year).
The government knows this and is trying to shift resources to the vast interior comprising the bulk of China.
But this region is so populous and so poor -— and so vulnerable to minor shifts in China's economic fortunes -— that China simply lacks the resources to cope, it said.
