World Economy

India to Step Up as China Slows

India to Step Up as China SlowsIndia to Step Up as China Slows

The urbanization of India and its swelling middle class will step in to fill the breach as China’s economic growth slows, Australia’s Minister of Resources Josh Frydenberg predicts.

Frydenberg says the fundamentals of the global economy are still in favor of commodities, as the Chinese slowdown and weak commodity prices prompted the International Monetary Fund to cut its global growth forecasts for the third time in less than a year, Yahoo news reported.

It has downgraded its growth forecasts for China and expects iron ore export-heavy weight Brazil to remain mired in recession in 2016 amid lower Chinese demand.

Frydenberg says the IMF’s global growth forecasts of 3.4% in 2016 and 3.6% in 2017 (down 0.2 percentage points from estimates in October) were still very strong.

Australia was now in the production stage of a commodities super-cycle, with a massive increase in supply putting downward pressure on prices, he said.

It would take some time for demand to catch up, but urbanization throughout the Asian region would create plenty of opportunities.

“Other opportunities in the region, particularly in ASEAN countries, particularly in India, will hopefully plug the hole that has been left by the slowdown in China,” he told Sky News on Wednesday.

“India has not gone through the urbanization and development that China has but under the (Prime Minister Narendra) Modi government they’re very intent on following that path.”

Iron-ore shipments to China hit a record in December as the world’s second-largest economy increased its steel exports to India, Frydenberg said.

Though other resource-dependent economies such as Brazil and Canada were technically in recession last year, Australia continued to grow strongly, creating 300,000 jobs.

The Australian economy was diverse, with strong growth prospects in tourism.

Figures on Tuesday showed China’s annual economic growth had slowed to a 25-year low of 6.9%.