Can India overtake China is coming years? India has an advantage over China. In China the number of aged people is increasing, while in India the rate of young people is increasing which is a big advantage for gorowth.
Much is being made of India’s “demographic dividend”, which is supposed to propel the country’s growth rate even ahead of China’s in the near future. The argument is simple and is based on the decreasing dependency ratio for India—this is the proportion of the sum of the population below 14 years of age and the population aged more than 65 years to the population aged between 15 and 64.
The assumption is that the population aged between 15 and 64 support the rest of the population. A lower dependency ratio, therefore, means a higher proportion of people of working age. This also results in higher savings, thus, accelerating investment and economic growth. In India, for instance, the dependency ratio, according to UN calculations, fell from 65% in 2000 to 56% in 2010.
Over this period, the savings rate went up from 24% to a projected 36% or so. In the next decade, the dependency ratio is expected to go down further to 49%, further increasing savings. China’s dependency ratio, however, is expected to bottom out at 39% this year, according to the UN computations and it will rise to 44% by 2020.
That suggests China’s highest growth rates are already behind it.
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India’s economy is believed to have grown by nearly nine per cent in the fiscal first quarter, the fastest pace in more than two years, powered by a strong industrial performance, economists say.
India’s Central Statistical Organisation was slated to release official gross domestic product data on Tuesday for the three months from April to June.
“Industrial activity was buoyant in the quarter,” said Mridul Saggar, chief economist at India’s Kotak Securities.
India’s still inward-looking economy is mainly driven by domestic demand, with exports accounting for less than 20 per cent of gross domestic product.
The government has projected a strong first-quarter with growth easing back to around 8.5 per cent for the full year.
India’s economy expanded by 7.4 per cent the previous year.
India escaped the brunt of the global financial crisis as rising incomes boosted domestic demand for cars, mobile telephones and other consumer durables even as exports took a hit.
The Indian economy could attain double-digit growth by 2013, the government has said.
Before the financial crisis, India’s growth was averaging an annual nine per cent.
Prime Minister Manmohan Singh has said India’s economy must attain double-digit growth if severe poverty problems are to be tackled effectively in the country of 1.2 million people.
The world’s second-fastest growing major economy is forecast to have expanded 8.9 per cent during the quarter from a year earlier, according to a Dow Jones Newswires poll of 19 economists,
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