India Set to Outpace China in 2016, Says Goldman

NUPUR ACHARYA
Dec 5, 2014

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It may be India’s time to shine as one growth projection suggests it could at last step out of China’s shadow.

Goldman Sachs is predicting that after more than 15 years stuck in China’s slipstream, India could surpass China in the next two years in terms of real gross domestic product expansion.

A recent report from the American investment bank projects India’s real GDP growth rate will remain behind China’s this year and next but surpass it in 2016 with 6.8% GDP expansion as China’s growth slows to 6.7%. The Goldman report predicts that India will extend that lead over the following two years.

As China’s economy cools because of a slump in the property market as well as sliding domestic demand and industrial production, India’s economy will be gaining momentum, said Tushar Poddar, chief India economist for Goldman.

“We believe the cyclical recovery (in India) has already begun,” he said. “Demand is gradually picking up, while persistently high inflation is trending down.”

The growth optimism comes just days after Transparency International’s annual ranking of least-corrupt countries placed India above China for the first time in 18 years.

In terms of growth, Goldman predicts that India will have one of the highest growth rates in the world in 2016 with more than triple the growth rates of Brazil, Russia, Japan or Europe.

While the most recent quarterly GDP growth figures showed a slowdown from the previous quarter, Goldman said it was expecting the new government–led by Prime Minister Narendra Modi who is using the rare majority his party won in Parliament in May to push through long-delayed spending and reform—to be good for the economy in the coming years.

“The new government has focused on boosting potential growth and removing bottlenecks on the growth path,” Goldman said in a Dec. 1 report. “The first six months (of the new administration) has already seen a move towards kick-starting the investment cycle, and we think reforms to boost investments can continue.”

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