India is the new global growth pole; to hold lead over China: Harvard study

The economic pole of global growth has moved over the past few years from China to neighbouring India, where it is likely to stay over the coming decade, according to new growth projections presented by researchers at the Center for International Development at Harvard University (CID).

The study says that 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 Southeast Asia, led by Indonesia and Vietnam. 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," the study said.

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 report said, quoting from the growth projections.

"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," the report added.

CID said that in examining the latest 2015 global trade data, they found a clear turn in trade winds, as 2015 marks the first year for which world exports have fallen since the 2009 global financial crisis.

According to CID growth projections, India, along with Uganda, will feature on top of the list of the fastest growing economies till 2025 with an average annual growth of 7.7 per cent.

"This time around, the decline in trade was driven largely by the fall in oil prices. High oil prices had driven a decade of rapid growth in oil economies, outpacing expectations. Since the decline in oil prices in mid 2014, growth in oil economies ground to a halt, where it is likely to stay, according to the projections, given little progress on diversification and complexity," the report said.

Stating that economic growth fails to follow one easy pattern, the report quoted the study as saying, "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 2015 data reveals a decline in China's exports, CID said in its report.

"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 growth projections still have China growing above the world average, though at 4.4 percent annually for the coming decade, the slowdown relative to the current growth trend is significant," CID noted in its report.

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.