Will India’s Economic Growth Overtake China’s By 2016?

It may sound like an opening chapter of Gene Roddenberry’s Sino Indian War, but will India’s economic growth eventually overtake China’s by 2016 according to the IMF? 

By: Ringo Bones 

Sorry China, but it is time to step aside. By next year, India could be the world’s fastest-growing large economy. This is the view adopted by a growing number of economists, many of whom think that China’s economy will continue to slow down this year and the next, while India continues to reap the benefits of lower crude oil prices and policy reforms. 

The International Monetary Fund became the latest organization to make the call on Tuesday, January 21, 2015 projecting that India’s economy will grow by 6.5 percent in 2016, faster than China’s predicted 6.3 percent expansion. The IMF said it expects Beijing to tolerate weaker growth as policymakers push through much needed structural reforms. India, meanwhile, will power ahead. “In India… weaker external demand is offset by the boost to the terms of trade from lower crude oil prices and a pickup in industrial and investment activity after policy reforms,” the IMF said in its report. 

Earlier in January, the World Bank made a similar prediction – although its economists think India will need an additional year to overtake China. The World Bank is also predicting 7 percent growth for both countries in 2016, but a 0.1 percentage point advantage for India the following year. 

Even if it posts a faster growth rate, India will not approach China in terms of raw economic power. India’s economic potential was once mentioned in the same breath as that of China, but the world’s biggest democracy has failed to deliver and India’s economy is roughly a fifth the size of China. Another giant grain of salt, economic predictions of this nature are very difficult to make, especially as they are expected to monitor economic trends that are yet to happen several years into the future.