The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

India: Asia’s new giant emerges

India’s recent rapid growth masks the fact that it still lags far behind China in terms of its economic development. Its catch-up potential remains huge, and its growth could be even faster. By Diana Choyleva and Maya Bhandari.

World Economic Forum special report: Contents


India has been investors’ emerging market darling for a couple of years. It has lifted its growth trend from the socialist 3.5% “Hindu rate” of the 1970s, to 5.5–5.75% in 1980-2000, and now 6.5%. Its large, educated, English-speaking labour force has made it less reliant on export-led growth, China-Tigers-style, more on human capital. Savings and investment have risen to 27% and 30% of GDP respectively in 2005 – fuelling growth through a relatively developed financial sector without an “Asian glut” of savings. Finally, its well-trenched legal system, corporate governance and democratic polity make it a favourable destination for foreign investors.

Recent GDP growth of 9% is well above the 6.5% trend This is not the new “trend” – or not without major reforms – contrary to some hopes. Growth of 8% in the past three years follows three years averaging under 5%. India has excess demand and constrained supply – hence the current deficit, 3% of GDP. Per capita income is 8.2% of America’s in purchasing power parity, and only 44% of China’s – therefore plenty of catch-up potential remains. Although its PPP GDP is fourth in the world, just behind Japan, its share of world GDP is under 2% at current exchange rates, and of world trade under 1%.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree