India still far from replacing China as global growth locomotive: Report
By Business Insider India
Even as India is moving towards a fast growing major emerging market
economy, but on economic parameters it is still too small to outsmart
China as a new global growth locomotive, says a new report by financial
services firm BNP Paribas.
China registered its weakest growth
since the 2009 global financial crisis with a dismal 6.9% GDP in the
third quarter of this year. India meanwhile is projected to grow faster
than China in the near future. As per Moody's Analytics, India's GDP
grew in September quarter by 7.3%, while for the full fiscal it would be
7.6%. India's GDP grew by 7.3% in FY15. Still, the hope that India can
replace China as a key locomotive of global demand is "misplaced".
"Although India is fast approaching China in terms of absolute
population, its much lower living standards mean its economy is around
five times smaller than China's. At market prices, Chinese GDP was a
little over $10 trillion in 2014, while India's was just over $2
trillion," BNP Paribas said in a research note. "Therefore,
those hoping that a more buoyant India can effectively replace the
ailing Chinese economy as a new global growth locomotive are likely to
be disappointed at least for the foreseeable future," it added.
Moreover, the structure of Chinese and Indian economies are also very
different. India's service sector is proportionately much larger than
China's, while its investment and industrial-production shares are much
lower, the report said.
The infrastructure investment has
surged to more than 20% of Chinese GDP, but it is still in ingle digits
in India. Given the respective sizes of the two economies, China's
annual spending on infrastructure in $terms is more than ten times that
of India's. The report further noted that Chinese commodity demand swamps India's.
India's commodity demand has been about ten times smaller -- it
consumed around 80 million tons of steel in 2014 as against China's 800
"Accordingly, while India may be slowly usurping
China in terms of overall GDP and industrial production growth, it
cannot realistically act as a meaningful offset to peaking Chinese
demand for industrial commodities as its epic investment cycle
inevitably flattens out," the report noted. Such as they are now