India has emerged as the economic pole of global growth by surpassing China and is expected to maintain its lead over the coming decade, says a new study by Harvard University.
According to the Harvard University's Center for International Development growth projections, India will feature on top of the list of the fastest growing economies till 2025 with an average annual growth of 7.7%, for a variety of reasons, news outlets reported.
"The economic pole of global growth has moved over the past few years from China to neighboring India, where it is likely to stay over the coming decade," the CID research suggested. The study attributed India's rapid growth prospects to the fact that it is particularly well positioned to continue diversifying into new areas, given the capabilities accumulated to date.
"India has made inroads in diversifying its export base to include more complex sectors, such as chemicals, vehicles and certain electronics," the growth projection pointed out.
"The major oil economies are experiencing the pitfalls of their reliance on one resource. India, Indonesia and Vietnam have accumulated new capabilities that allow for more diverse and more complex production that predicts faster growth in the coming years," it added.
Stating that economic growth fails to follow one easy pattern, the study said, "The countries that are expected to be the fastest growing—India, Turkey, Indonesia, Uganda, and Bulgaria—are diverse in all political, institutional, geographic and demographic dimensions."
"What they share is a focus on expanding the capabilities of their workforce that leaves them well positioned to diversify into new products and products of increasingly greater complexity," the new growth projections by CID added.
Besides, the projections divide countries into three basic categories: First the countries with too few productive capabilities to easily diversify into related products. Secondly, the countries that have enough capabilities that make diversification and growth easier, include India, Indonesia and Turkey. Last, the advanced countries such as Japan, Germany and the US that already produce nearly all existing products, so that progress will require pushing the world's technological frontier by inventing new products, a process that implies slower growth.
Emerging Markets
The growth projections are based on measures of each country's economic complexity, which captures the diversity and sophistication of the productive capabilities embedded in its exports and the ease with which it could further diversify by expanding those capabilities.
Growth in emerging markets is predicted to continue to outpace that of advanced economies, though not uniformly. The projections are optimistic about new growth hubs in East Africa and new segments of South-East Asia, led by Indonesia and Vietnam.
The new data reveals a decline in China’s exports. China’s economic complexity ranking also falls four spots for the first time since the global financial crisis. “China’s rapid growth rate over the past decade has narrowed the gap between its complexity and its income, which researchers suggest is the harbinger of slower growth,” the research said.
The growth projections still have China growing above the world average, though at 4.4% annually for the coming decade, the slowdown relative to the current growth trend is significant, it added.
The growth projections are based on measures of each country’s economic complexity, which captures the diversity and sophistication of the productive capabilities embedded in its exports and the ease with which it could further diversify by expanding those capabilities.
New Capabilities
“The major oil economies are experiencing the pitfalls of their reliance on one resource. India, Indonesia and Vietnam have accumulated new capabilities that allow for more diverse and more complex production that predicts faster growth in the coming years,” said Ricardo Hausmann, director of CID, professor at the Harvard Kennedy School, and the lead researcher of The Atlas of Economic Complexity.
Uganda joins three other East African countries in the top 10 fastest growing countries, though a significant fraction of that growth is due to rapid population growth. On a per capita basis, Uganda is the only East-African country that remains in the top 10 in the growth projections, though at 4.5% annually its prospects are more modest.
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