India Will Be World’s Fastest Growing Economy Until 2026

India tops the list of the fastest growing economies in the world for the coming decade and is projected to grow at 7.9% annually, ahead of China and the US, according to a Harvard University report.

The Center for International Development at Harvard University said in new growth projections that countries that have diversified their economies into more complex sectors, such as India and Vietnam, are those that will grow the fastest in the coming decade, PTI reported.

“India tops the list as the fastest growing country for the coming decade, at 7.9% annually, in the economic complexity growth projections. India has made inroads in diversifying its export base to include more complex sectors, such as chemicals, vehicles, and certain electronics,” the report said. It said that India’s productive capabilities far exceed expectations for its current income level, which contributes to the projection of rapid growth for the coming decade.

The researchers also find India ranks the best on the criteria termed the Complexity Opportunity Index, which measures how easy it is to redeploy existing knowhow to enter new complex products.

“India’s existing capabilities have not only diversified its exports, but also allow for easy redeployment into related products that depend on those capabilities, making diversification relatively easy,” it said.

India regained its status as the world’s fastest growing major economy in the October-December quarter, surpassing China for the first time in a year, and is likely to retain that title for in the coming years.

Unrealized Opportunities

China is projected to grow at 4.9% annually to 2026, the US 3% and France 3.5%. The top ranking in COI means India has many “unrealized opportunities” to diversify into related, high-value sectors to continue to drive productivity growth and job creation.

“Up to now, that potential remains unrealized, however, as India’s complexity has not changed over the past decade. The rapid growth that is predicted is effectively capitalizing on previous gains in complexity,” the report added.

It stressed that ensuring the long-run potential of India’s economic growth will rely on realizing diversification into related products.

Other Challenges

The other major challenge will be to ensure the inclusive nature of this productive transformation, as the gains made in new chemical, vehicle and electronics exports are highly concentrated in specific localities of the subcontinent.

“Whether that knowhow can be disseminated into new areas of India will in part determine whether growth can be sustained in the long-term,” it said.

Director of CID, professor at Harvard Kennedy School and the leading researcher of The Atlas of Economic Complexity, Ricardo Hausmann, said that South-East Asia continues to dominate the global growth landscape, driven by the diversification of economies into complex manufacturing, but the leading countries have shifted within the region, with the Philippines, Vietnam, Indonesia and Thailand poised to lead growth in the coming decade.

Africa and Other Regions

South Africa will sustain average economic growth of 4.91% per year for the next 8 years until 2026, the Harvard report said. This far ahead of other projections, particularly that of the IMF, which only expects 1.5% in 2018 and 1.7% next year. The World Bank sees growth of 1.4% this year.

The report didn't provide any details on South Africa's economic growth case. It still lags behind projections for other African countries including Egypt with 6.63%, Tanzania 6.15%, Mali 5.89% and most notably Uganda with an expected annual economic growth of 7.49%.

The report found that after a decade of commodity and oil-driven economic growth, diversified economies are set to grow faster.

Other first world countries such as the US and UK are set to grow by only 3.07% and 3.69%—with Germany only expected to grow a meager 2.38%.

The report also states that if low-income countries want to experience rapid growth, economic diversification and complexity is a necessity.

“Many low-income countries, including Bangladesh, Venezuela, and Angola have failed to diversify their knowhow and face low growth prospects,” Sebastian Bustos, a researcher in trade and economic complexity methods, said.

“Others like India, Turkey, and the Philippines have successfully added productive capabilities to enter new sectors and will drive growth over the coming decade,” Bustos said.