India has the potential to be the fastest growing economy over the coming decade, says the new growth projections presented by researchers at the Harvard University's Centre for International Development (CID).
India tops the global list for predicted annual growth rate for the coming decade, at 7 per cent, according to the study. This far outpaces projections for its northern neighbour and economic rival, China, which the researchers expect to face a continued slowdown to 4.3 per cent growth annually to 2024.
The projections reflect the latest 2014 trade data available. The global landscape for economic growth shows greatest potential for rapid growth in South Asia and East Africa. Conversely, oil economies and other commodity-driven economies face the slowest growth outlook.
“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 (HKS), the leading researcher of The Atlas of Economic Complexity, and the director of CID in a statement.
Hausmann notes 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,” Hausmann said.
Growth in emerging markets is predicted to continue to outpace that of advanced economies, though the gap is closing. The CID projections are also bullish on East Africa. Five East African countries, which include Uganda, Tanzania, and Kenya, rank in the top ten, with all predicted to grow at least 5.5 per cent 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 per cent annually to 2024, with higher growth predicted in the United Kingdom and Spain, and slower growth in Italy and Germany.
The researchers at Harvard 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.
Measuring economic complexity
Along with the growth projections, CID released new country rankings in the 2014 Economic Complexity Index (ECI). India was ranked 42nd this year at ECI moving 5 positions up.
The top of the rankings continue to find Japan, Germany, and Switzerland holding the greatest economic complexity, while Great Britain (10th), the United States, (13th) and France (16th) have all slid.
The ECI ranks countries based on the complexity of their export basket, which was updated to include the 2014 data while also incorporating revisions to previous years stretching back to 1962.