Indian economy will grow faster than China in 2012: World Bank

Indian economy will grow faster than China in 2012: World Bank

NEW DELHI: For years, India has been the second-fastest growing major economy in the world. That could soon change, with the Indian economy set to expand at a faster pace than China in 2012, according to World Bank data.

This is expected to result from continued high demand in India even as measures to combat overheating kick in for the Chinese economy.

The multilateral agency`s World Economic Outlook has projected that India will grow at 8.7% in 2012, compared to China`s 8.4%. In 2011, however, China would continue to grow at a faster pace than India.

Although no reasons were mentioned in the report released on Thursday, the slowdown in China could be the result of an increase in interest rates as inflation has emerged a major concern across the border too, economists said. China has seen a rapid turnaround after the financial crisis on the back of fiscal stimulus.

In case of India, the economy has benefited from robust domestic demand and a revival in investor and consumer sentiment although higher interest rates are expected to shave off a few basis points from the overall growth rate. Improved external demand and stronger private capital inflows have also played a role. This year, a favourable monsoon has helped the farm sector expand and has in the process boosted rural demand as well.

Economists, however, played down the numbers. "If you are keeping scores, it`s fine but you must remember China is a $5.5 trillion economy while India is a $1.3 trillion economy. Even with a slower growth rate, incremental demand in China will remain much bigger than in the US," said Saumitra Chaudhuri, a member of the Prime Minister`s Economic Advisory Council and a member of the Planning Commission.

"It may be the case for one or two years but what matters is whether India can sustain high growth," added D K Joshi, chief economist at rating agency Crisil.

"It has to be seen how they are saying that the (China`s) growth rate will decline from 10% plus levels to 8.4%. For us, 8.7% is probably closer to our trend growth," said Pronab Sen, senior advisor in the Planning Commission.

China and India have seen rapid growth and have helped push up the global growth rate in the year`s post the financial meltdown. But India has always lagged its Asian rival, often referred to as the factory to the world, as China has flooded the international market with products ranging from lingerie to LCD television.

In recent years, foreign investors have bet big on India too, setting up manufacturing facilities but it has always been the second-most preferred destination. The increase in wages in China could, however, tilt the competitiveness scales in India's favour.

Overall, the report said that in 2011 and 2012, the global economy is shifting into a phase of slower but solid growth, with India and China contributing towards almost half of the global growth.

The World Bank estimated that global GDP, which expanded by 3.9% in 2010, will slow down to 3.3% in 2011 before reaching 3.6% in 2012.

In terms of policy prescriptions, the report said that in case of the South Asia, where India is driving growth, the recent monetary tightening would need to be pursued further given the region's high fiscal deficits, high inflation and rising current account deficit.

The report also warned that countries such as India, China and Brazil would have to grapple with high levels of capital inflows given the interest shown by foreign institutional investors. "Heavy inflows to certain big middle-income economies may carry risks and threaten medium-term recovery, especially if currency value rises suddenly or if asset bubbles emerge," it said.

Read more: Indian economy will grow faster than China in 2012: World Bank - The Times of India http://timesofindia.indiatimes.com/b...#ixzz1Ax7Hnrfp

Only 8.4% in 2012, I would like to see 9 - 9.5% by that time.

It's good to see India and China continue to grow at fast speed. Indian and Chinese deserve better life.

History is going to repeat itself where Asia is economic powerhouse of the world. but same history never had India and China as enemies . enmity between us may alter the equations drastically.

Finally, we see the light that we can get back to the normal life: no more "chinese threat", no more "how china cooks its book".

I know, I know, the question would still be there for a couple of years. But since india would be the fastest one, people would focus their eyes on india.

Growth rate isn't everything, these numeric comparisons are meaningless. All economies have to plateau at some point. What really matters is the depth of the economy. In that regard China likely to keep a strong lead. The deciding factor has been the investment in infrastructure, particularly education.

I am skeptical that India will ever take a lead over China in this regard. Ours has always been a shallow growth, never reaching down to the grassroots, wish that would change !

If chinese continued there support to pakiztan than defenately there economy will slow down.

Yes, India is unlikely to achieve the same success, however I think that is because of the state's priorities, and of course how well plans are executed. China's trickle down economy isn't really anything to write home about either, if I'm not mistaken they actually rank lower on the wealth distribution index. What is different however is that China has expended resources on infrastructure and education. These two factors are actually the best option when it comes to rehabilitation and human development (albeit the effects are seen after a long time). India hasn't really invested in infrastructure, yes there's the golden quadrilateral but that is primarily limited to the areas of economic activity. It is interesting to note that even all the rural areas along the highway system have had an economic upswing. However the hinterlands of India where the world's greatest pool of poor reside still remains isolated.

The inability to educate the inhabitants of rural India is an even greater retardant to comprehensive growth in the future.

LOL !! How do you arrive at that conclusion ?? Throwing a billion dollars or two will slow down a $6 trillion economy !!

Fully agreed. That's the impresssion I got last time in India, even just dozen days mainly at Banglore and its rural area. There is still lot more can be done for the poor.

As far as can be reached, India should be able to collect available funding and invest in infrastructure. Just wonder what hinder it.

An article on Economist this issue, just tried to post it to the "India Economy" Thread, yet approved.

Infrastructure in India
Infrastruggle -- One of India's most important industries has a knacked balance-sheet

India actually already grew faster than China in 2010 itself according to IMF estimates. 10.4 vs 10.3%
Finally, India beats China in growth - Indian Express

And this is despite teh fact that we are hitting a second GFC which is potentially going to be bigger than the 2008 GFC.

Afaik , Indian govt has implemented some plans to improve rural infra and bring better connectivity to rural areas although I didn't see any mention of educational facilities.. Which in my opinion must be the first priority

I wholeheartedly welcome your sentiments. India and china have never been at each others throat in millions of years of existence and why should that be now. But today being today and not yesterday, Chinese knocked at the door and opened it. They must shut it now by resolving the dispute and stop Hanisation of Tibet. It is in India and China's interest to go on a long march together.

But Chinese are not known for their rationality.

So the World Bank made this prediction at the start of 2011？

A year has passed since the publication of the report and the forecasts are looking more hilarious than ever。

In 2011 China is likely to achieve a real growth rate of 9.2%, while India will be lucky to have 7%。

And that's not considering the change in the value of the two countries currencies. Measured in US dollars, and taking into account the general price levels of each country, there will be very little nominal GDP growth for India and 20% plus for China.

As for 2012, the year during which India is supposed to surpass China in terms of growth rate according to the venerable World Bank, China will see a moderation in growth rates from 9.2% to 8.5-9%, with India struggling for 6.5% at best.