PWC Report on "The world in 2050"- India tops the growth league table
PriceWaterhouseCoopers(PWC) have just published (March 2008), a report titled, "The world in 2050 - Beyond the BRICs: A broader look at emerging market growth prospects." [The acronym BRICs stands for Brazil, Russia, India and China.]
This is an update of PWC's report of March 2006.
PWC affirm that they are now even more optimistic than in their 2006 report about China and India, given the two countries' recent very strong performance.
Some of the highlighted projections of their latest analysis:
**By 2050, the E7 emerging economies (Brazil, Russia, India and China, plus Mexico, Indonesia and Turkey) will be around 50% larger than the current G7 (US, Japan, Germany, UK, France, Italy and Canada). PWC are only projecting a relative decline in the size of the G7 economies. In absolute terms they might grow by around 150 percent in real terms between 2007 and 2050. In the long run, the growth of E7 and G7 will be mutually beneficial, reinforcing each other rather than competitive, as each will have the opportunity to specialise in its areas of comparative advantage.
**China is expected to overtake the US as the largest economy in around 2025.
**India has the potential to nearly catch up with the US by 2050.
** Thus, the three major economies in the world in 2050 are likely to be China, the US and India. There will be a huge gap between these three economies and the next largest viz. Brazil and Japan. ,
**Among the smaller nations, the projected list of fastest growing economies to 2050 is headed by Vietnam, and the top 10 includes Nigeria, Philippines, Egypt and Bangladesh
**By 2050, the Japanese economy is projected to be somewhat smaller than that of Brazil and not much larger than those of Russia or Mexico, having been overtaken much earlier by China (in around 2010) and India (in around 2025).
**If the GDP in PPP(Purchasing Power Parity) terms of the US, the benchmark economy, is taken as 100, China will grow from 51 in 2007 to 129 in 2050, India from 22 to 88, Brazil from 15 to 26, Russia will remain the same at 17, Indonesia will grow from 7 to 17, Mexico from 10 to 17, and Turkey fro 5 to 10. Japan will decline from 28 to 19, Germany from 20 to 14, and both UK and France from 15 to 14; and Korea from 9 to 8.
**Over 2007-50, projected growth in GDP in PPP terms of India at 8.5 percent is expected to be higher than China's 6.8 percent; and GDP per capita in PPP terms will be 5 percent for India and 4.6 percent for China.
**India could rise from today’s relatively low levels to emerge as the third largest domestic banking market in the world by 2040 — and could ultimately grow faster than China.
**Impact of global growth on carbon emissions: The projections demonstrate that if countries sit back and adopt a "business as usual" approach, the result could be a more than doubling of global carbon emissions by 2050. Based on current scientific thinking, this could have potentially serious longer term implications in terms of global warming and related climate change. On the other hand, a scenario such as the "Green growth plus" strategy outlined in the report could allow for continued healthy growth whilst controlling carbon emissions.
**The major shift in economic power to emerging countries such as China and India should be grasped by those in established economies as an opportunity to boost trade rather than feared as an economic death knell.
"What might surprise some readers," the PWC report avers, "is that India rather than China, tops our growth league table." This reflects the following factors:
(a) significantly slower labor growth in China due in particular to the effects of its one-child policy; this will lead to a rapid ageing of the Chinese population over the next 45 years and a projected decline in its working age population, while India's working age population is projected by the UN to continue to grow at a healthy rate;
(b) the fact that average productivity and edication levels across the population are currently lower in India than inChina, giving the former greater scope to catch up with the OECD countries in the long run, provided that India can maintain the right kind of institutional policy framework to support economic growth (and also gradually overcome cultural barriers to female education in rural areas of India in partcular;
(c) China's growth to date has been driven by very high savings and capital investment rates, but experience with Japan and other earlier 'Asian tigers' suggests that such investment-driven growth eventually runs into diminishing returns once income levels approach OECD levels; as China ages, it is also likely that its savings rate will drop as assets are 'cashed in' to pay for the retirement of its ageing population, though it is still assumed that its savings and investment rates remain somewhat above the OECD average in the long run.
China is projected to remain the fastest growing BRIC economy over the next few years, but is gradually overtaken in terms of growth rates (though not levels of GDP) by India in around 2015 and Brazil in around 2025. The decelerating growth profile in China reflects the factors discussed above, in particular China's rapidly ageing population ( the same factor accounts for the marked deceleration in projected growth in Russia over the next 20 years). In contrast, the much younger and faster growing Indian and Brazilian populations are able to sustain a more stable rate of growth up to around 2030, although after that they too experience a gradual deceleration as their populations also begin to age.
[A question: What happens if, in the near future, China changes its "one-child" policy to, say, a "two-children" policy?]
Where India will not shine as much as the other nations is in GDP per capita. Here, clearly, its population size acts as a drag In constant 2006 dollars, India's GDP percapita in PPP terms is expected to rise from $2500 in 2007 to only around $20,000 in 2050, whereas China's corresponding figure jumps from $5200 to $34,500.
To read the complete report of PriceWaterhouseCoopers, please click: "The world in 2050 - Beyond the BRICs: A broader look at emerging market growth prospects"