Everyone from the World Bank to Goldman Sachs had predicted it wouldn’t happen for another two years but recent recalculations indicate that India has already dethroned China as the world’s fastest-growing big economy.
Late Monday, India’s statistics ministry surprised economists when it unveiled the new numbers for the growth of India’s gross domestic product. It ratcheted up India’s GDP growth figures using a new methodology that pegs expansion in Asia’s third-largest economy at 7.5% last quarter and 8.2% the quarter before that. Economists and the ministry, using the old methodology, had originally said growth was closer to 5.5% during those quarters.
While economists, investors and executives are still wondering how growth could have been so high during those quarters when other indicators suggested times were tough, the new official numbers mean that India outpaced China, taking the pole position as the fastest-growing major economy in the world.
India has been able to catch up because China’s growth has been slowing. The Middle Kingdom’s GDP expansion was 7.3% in both the third and fourth quarters of 2014. While there are smaller economies which may have had stronger growth, this puts India on top after decades driving in China’s slipstream.
Of course, China’s economy is still four times the size of India’s.
“There’s no comparison between these growth rates because of the size of the economy of China,” said Ashish Kumar, director general of the Central Statistics Office as he announced the new GDP growth numbers. “If this kind of growth continues and China continues to perform at a lower level, then still it will take 20 to 30 years to catch up.”
Still, if it can keep up this pace at least India will be gaining some ground. More importantly, a return to high growth might mean India is following in China’s footsteps and entering a take-off phase.
The South Asian nation needs to revamp its economy to help create more manufacturing jobs and savings if it wants to become the next China, said Frederic Neumann, an economist at HSBC in a recent report.
“That’s a challenging transformation,” he said. “India may never quite match the rapid ascent of China, but even at a slightly slower speed it will start to make waves.”
via India Passes China to Become World’s Fastest-Growing Economy – China Real Time Report – WSJ.
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