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Sun. July 14, 2024
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Economic Future of India & China: 2023 and Beyond
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Although the world economy faces a recession in 2023, India’s economy has staged a smart recovery after the pandemic. Its GDP growth forecast is nearly 7% for 2023. As multinationals are diversifying supply chains away from China, many are moving to India. Today, it is trying to unseat China in higher-end manufacturing. India’s long-term future is bright.

As per the WEF by 2030, India will have a strong middle class driving most consumer spending. The CEBR predicts that India will become the third $10 trillion economy in 2035, and the world's third-largest by 2032

Meanwhile, China’s economy faces severe strains and economic growth is expected to fall between 2.8% and 3.2% this year, one of the lowest levels since the 1970s. The IMF warned this growth forecast might be cut even further. Despite facing headwinds and a harsher external environment, China's economy is set to recover steadily next year. It plans to ease these restrictions, even as case numbers remain high. Certainly, it revives slumping business activity and the economy will recover next year. Morgan Stanley raised the forecast for the GDP next year to 5.4 percent from 5 percent previously. The IMF has also forecast that China's growth will accelerate to 4.4 percent next year, as compared with a meager 1 percent growth. Standard Chartered predicts that China's economy will grow by 4.5% in 2023.

Although China faces formidable economic challenges, it has a bright future in the long term.

By 2035, Bloomberg Economics forecasts, China will have overtaken the US to become the world’s biggest economy, while the CEBR predicts that it will happen in 2036. That reflects China's Zero-Covid policy and rising trade tensions with the West, which have slowed its economic expansion.

PwC believes that the global economy will double in size by 2042, growing at an average rate of 2.6% between 2016 and 2050. Emerging market countries including China and India will primarily drive these growth rates. These countries will grow at an above-average 3.5% rate, compared to just a 1.6% average rate for the advanced economies.

In the long-term future, both India and China will profit from what is called Asia’s Century as the continent returns to the center of the global economy. There will occur a historic shift in relative power between countries. By the 2040s, China’s annual GDP growth will decline to around 3% while India will grow at a faster rate. As they grow, both China and India will benefit from massive domestic markets providing national champions with enormous economies of scale and acting as a pull for foreign multinationals. By 2050, Asia will contribute more than half of the global GDP while North America and Europe will retreat.

Dr. Sohail Mahmood is an Independent Political Analyst based in Chapel Hill NC

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