India projected to be fastest growing economy over next 10 years

New York: India, with a projected annual growth rate of 7 percent, has the potential to be the world's fastest growing economy over the coming decade, surging ahead of its South Asian economic rival China that will continue to see a slowdown, Harvard researchers said in new forecast.

"India has the potential to be the fastest growing economy over the coming decade... India tops the global list for predicted annual growth rate for the coming decade, at 7.0 percent," new growth projections presented by researchers at the Centre for International Development (CID) at Harvard University showed.

"This far outpaces projections for its northern neighbour and economic rival, China, which the researchers expect to face a continued slowdown to 4.3 percent growth annually to 2024, the report said. South Asia and East Africa have the greatest potential for "rapid growth" as oil economies and other commodity-driven economies face the slowest growth outlook, it said.

"India has made important gains in productive capabilities, allowing it to diversify its exports into more complex products, including pharmaceuticals, vehicles, even electronics," said Ricardo Hausmann, Professor of the Practice of Economic Development at Harvard Kennedy School and CID director.

Hausmann noted these gains in economic complexity have historically translated into higher incomes. "China has already realised many of these gains, doubling per capita income in less than a decade. We expect that India's recent gains in complexity, coupled with its ability to continue improving it will drive higher incomes, positioning India to lead global economic growth over the coming decade," he said.

The CID data predicted that growth in emerging markets will continue to outpace that of advanced economies, though the gap is closing. CID is also bullish on East Africa, with Uganda, Tanzania and Kenya ranking in the top 10, with all predicted to grow at least 5.5 percent annually.

The growth forecast also looks favourably on Southeast Asia, where the Philippines, Malaysia, Indonesia and Vietnam look to drive growth well above global averages. Growth in advanced economies remains slow by comparison, though it has risen slightly in the projections in recent years.

The US is expected to grow at 2.8 percent annually to 2024, with higher growth predicted in the United Kingdom (3.2 percent) and Spain (3.4 percent), and slower growth in Italy (1.8 percent) and Germany (0.35 percent).

The United Nations has also predicted that India will continue to be the fastest growing economy in the world in 2016 and 2017, projected to grow by 7.3 percent next year and 7.5 percent the year after amid a global order that will see persistent macroeconomic uncertainties, diminished trade flows and stagnant investment.

The United Nations World Economic Situation and Prospects (WESP) 2016 report launched earlier this month also predicted a slowdown in growth for China, which will grow in 2016 by 6.4 percent and by 6.5 percent the year after.

"Sustained economic growth is fundamentally human-driven: the greater the diversity of productive knowhow in a place, the more the complex products it can make, which underpins income gains," CID researcher on the project Timothy Cheston said.

The CID researchers used their newly updated measure of economic complexity, which captures the diversity and sophistication of productive capabilities embedded in a country's exports, to generate the growth projections.

The projections are based on a decade of research into the relationship between measures of economic complexity and growth, which, the researchers argue, isolates a consistent fact: countries that diversify their productive knowhow beyond what is expected by their income tend to grow faster.

Economic complexity shows remarkable accuracy in explaining differences in countries' income levels - and in predicting future economic growth.

The Centre for International Development (CID) at Harvard University is a university-wide centre that works to advance the understanding of development challenges and offer viable solutions to problems of global poverty.

CID is Harvard's leading research hub focusing on resolving the dilemmas of public policy associated with generating stable, shared, and sustainable prosperity in developing countries.