After being wrong for over a decade there are renewed predictions that India’s GDP growth will pass China

India’s GDP growth is expected to rebound with improved prospects for reforms, real gross domestic product (GDP) growth should increase from 4.7% in 2013-14 to around 6% in 2014-15 and 7% in 2015-16.

China is GDP Growth is expected to fall to around 7.3% this year and 7% next year. While a housing crunch could precipitate market turbulence and a sharper slowdown, a combination of a mini-stimulus and firmer external demand should help achieve a soft landing in China. In the medium term, policymakers are seeking a new normal annual growth path of 6-7%.

India finally had a significant round of economic reforms in 1991 after 3 decades of the hindu rate of growth after indepedence. Over the last two decades, India’s economy has almost quadrupled in size, growing at an average rate of about 7% per annum and over 9% from 2005 to 2007. India got close but never passed China in GDP growth in any year. Every year since about 2000, there were those who predicted that China’s economy would do badly and India’s economy would do better. The main reason were younger demographics and more english speakers and perhaps democracy.

We will see if China finally slowing down with a more mature economy will allow India to finally start catching up economically.

While the prospects for India relative to China are turning more sanguine, there is a lot of catching up to do. China’s per capita GDP is $7,000, as against $1,500 for India. China’s exports were $2.2 trillion in 2013, but only $320 billion for India. China attracted inward foreign direct investment (FDI) of $250 billion in 2013, compared with $30 billion for India. Tripling annual FDI through investor-friendly policies should be an important near-term objective for India. As such, India has a long way to go and many challenges to overcome. But, hopes are rising.

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