“While we believe China will continue to be an important growth engine for the global economy for a long time to come, we also think India could potentially emerge as a major growth rival for its north eastern neighbor over coming decades.”
In China the one child policy has detracted from China’s demographic profile. However, in contrast, India’s demographics are very promising, with a large young generational cohort entering the workforce over coming decades, potentially driving a long period of self-sustaining economic growth.
“If India is able to harness the opportunities its favorable demographics present, it will emerge as a real global growth power house, increasing its share of the global workforce, driving substantial expansion in its middle class which, in-turn, will drive consumption and economic growth. This growing middle class will demand new and improved infrastructure, as well as lead to a general increase in consumption spending and wealth creation,” Mr Goodsell said.
However, India faces significant challenges in delivering this outcome. The ongoing reform agenda in India is critical to its future prosperity. PM Narendra Modi, who came to power in 2014 on a reform ticket, clearly understands this.
“To date, he has achieved much including increased spending on much needed national infrastructure,” said Mr Goodsell. “In probably the most significant reform to-date, and after a decade of political wrangling, Mr Modi achieved parliamentary approval for the introduction of a national goods and services tax (GST). This clears the biggest hurdle to unifying India’s 1.3 billion people into a single market for the first time. Clearly, PM Modi is committed to unleashing the Indian tiger.”
But none of this potential success is guaranteed, and you only need to look at the divergent past experiences of say Brazil versus South Korea in their transitions to middle income economies. “What was critical in those two cases was how effectively the ‘growth dividend’ was shared fairly amongst all levels of society. The more equitable and broad the wealth distribution, ultimately the more successful the nation,” said Mr Goodsell.
Mr Goodsell concluded, “what we can say with certainty though is that, in terms of global economic growth, the coming century will be very different to the last; and China and India will be at the forefront of that experience”.