India’s economy is on a tear at the moment and, if the International Monetary Fund (IMF)’s forecasts are correct, the country could grow faster than China next year. But could one of the factors helping growth—commodity prices—spoil India’s ride?
A combination of low commodity prices, strong demographics and new leadership in government and the central bank mean India is set to grow by 7-8 percent annually for the next 10 years, according to Anand Shah, chief investment officer of BNP Paribas Investment Partners India. This could see the country become the world’s third-biggest economy by around 2030 and the second-largest by 2040.
“The macroeconomy has never been better in India,” Mumbai-based Shah told CNBC on Tuesday, ahead of a client conference in London.
Since the latter half of 2014, official estimates have indicated that India’s growth is nearing that of China—where economic expansion continues to fall further from the once-standard 10 percent per year. This year, the IMF forecast that India’s growth would near that of China in 2015 and trump it in 2016.
Optimism for the country’s fortunes has increased since the election of Narendra Modi, who has pledged to decrease unemployment, upgrade infrastructure and combat government inefficiency and corruption.
“India’s really operating from a position of strength right now,” David Riedel of Riedel Research Group told CNBC last week.
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