By: O. Safitrie *)
The debate on whether Indian economy will eventually beat China’s reappear after IMF lower its prediction on China’s economic growth.
International Monetary Fund (IMF) launched its World Economic Outlook predicting that China will grow 6.8 percent this year (this is lower than October IMF’s prediction that China will grow at 7.1%) and 6.3% in 2016. Meanwhile India is predicted to have 6.3% growth this year and beat China with 6.6% growth rate next year. World Bank has different numbers but signalling similar notion.
According to Foreign Policy, this projection has come up more than a decade ago. MIT scholar Yasheng Huang and Tarun Khanna of Harvard Business School predicted that India would eventually overtake China. Since then this controversial argument has become one moot point.
Will this prediction be right? Perhaps, but it might be too early to say so. Both China’s slowdown and India rapid growth can be explained by basic economic growth theory. It is not something amazing for a lower economy to have a high growth as it still has many areas to be developed. In contrast, referring to the theory of diminishing marginal utility return, it is normal for highly developing economy to have declining growth rate.
The credit should be given to Modi’s government, though, for their successful economic reform. If this structural change can sustain years ahead, India will be likely to make the prediction happen. This will be a remarkable history for India to finally beat China and be fastest-growing economy for the first time in the world. But, the gap is still wide and the dragon seems not going to let it happen any soon.
*) The Author Is Singapore Contributors
