By next year, India could be the world’s fastest-growing large economy.
That’s the view of a growing number of economists, many of whom think China’s economy will continue to slow this year and next, while India reaps the benefits of lower oil prices and policy reforms.
The International Monetary Fund became the latest organization to make the call, on Tuesday projecting that India’s economy will grow by 6.5% in 2016, faster than China’s predicted 6.3% expansion.
The IMF said it expects Beijing to tolerate weaker growth as policymakers push through needed structural reforms. India, meanwhile, will power ahead.
“In India … weaker external demand is offset by the boost to the terms of trade from lower oil prices and a pickup in industrial and investment activity after policy reforms,” the IMF said in its report.
Earlier this month, the World Bank made a similar prediction — although its economists think India will need an additional year to overtake China. The group is predicting 7% growth for both countries in 2016, but a 0.1 percentage point advantage for India the following year.
Even if it posts a faster growth rate, India will not approach China in terms of raw economic power.
India’s economic potential was once mentioned in the same breath as that of China. But the world’s biggest democracy has failed to deliver, and its economy is roughly a fifth the size of its Asian rival.
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