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World Bank expects Indias GDP to chase China’s

January 16, 2013

While the trade deficit between India and China yawns wider to US$29 billion in December, as Indian exports drop in both volume and value, analysts are predicting both nations to grow at 7-8 percent GDP by 2015. With India expected to rise from her 5 percent GDP growth rate, China is expected to consolidate growth.

According to the World Bank’s recently released issue of Global Economic Prospects 2013, China’s growth rate would be 7.9 percent and that of India 7 percent. According to the bank, at factor cost (excluding government interventions such as indirect taxes and subsidies) India will grow from 5.1 percent in 2012 to 6.4 percent in 2013-14, 7.1 percent in 2014-15 and 7.3 percent in 2015-16. In contrast, from a near 9 percent growth in 2012, China is expected to grow 8.4 percent, 8 percent, and 7.9 percent in the successive three years. On a more global scale, the World Bank forecasts that global gross domestic product (GDP) will inch up 2.4 percent this year, from 2.3 percent in 2012. In its last forecast in June, the bank projected global growth would reach 3 percent in 2013.

“China is growing at a phenomenal rate right from 1978 or 1980 and you can’t grow at 10 percent for more than a couple of decades. “China has done it for 30 years and this has been expected in China and expected by us that China will continue to grow very rapidly but it will probably come down from these great highs,” World Bank Chief Economist, Kaushik Basu told a news conference.

“If it comes down to 7.9 percent…I think not. India was growing from 2003 to 2008 at close to nine per cent per annum, with the last couple of years actually over nine per cent, and we expect that India, having taken off only about 10 years ago, to have some still to go. “So, there is going to be a catch-up of India’s growth getting closer to China’s growth and, who knows, a couple of years down that road, they may be completely neck to neck,” Basu said in response to a question.

Counting on their developing world counterparts, the World Bank feels that in order to reach pre-financial crisis rates of growth, developing countries including China and India will need to focus on productivity-enhancing domestic policies, to assure robust growth in the long-term. This includes organizing their houses in the government, social, healthcare, women and education departments. Recent out-cry’s by the people of both nations has proved significantly that both China and India need to get their homes in order before burdening themselves with global pressures.

Expecting developed nations to grow slightly over the next 12 months, from a very weak 1.3 percent this year, weighed down primarily by spending cuts, high unemployment and weak consumer and business confidence, the World Bank expects activity to strengthen next year to 2 percent and 2.3 percent in 2015.

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