India will grow at a faster pace than its neighbour China from 2016, according to a Goldman Sachs economist.
The U.S.-based investment bank's chief India economist Tushar Poddar estimates India's growth at 6.8% in calendar 2016 and 7.0% in the next year, outstripping China's 6.7% and 6.5% for the corresponding years, according to Forbes India.
India's faster clip will be driven by many factors, ranging from economic reforms to fall in fiscal and current account deficits.
Other investment banks such as Morgan Stanley and Citibank also remain bullish on India.
Buoyant India
The recovery is expected to be led by easing liquidity and rise in foreign direct investment (FDI).
Structural reforms kick-started by newly-formed BJP Government led by Prime Minister Narendra Modi and fall in fiscal and current account deficits could further boost growth.
"We expect a pick-up in [India] growth led by investment demand," Poddar said. The bank forecasts India to grow at 6.3 percent in calendar year 2015.
India grew by 4.7 percent in financial year 2013-2014.
Structural reforms are expected to gain pace, starting with energy, infrastructure, technology and manufacturing sectors in the coming year.
Reforms in agriculture and labour could take 2-3 years to take root, Poddar said.
Poddar, like many other economists, expects the Reserve Bank of India to cut interest rates in the first half of 2015. He is betting a fall of up to 50 basis points over two policy review meetings and expects the rupee to trade flat at 63 to the dollar.
Declining China
Paradoxically, China faces slowdown after years of high growth, with many negative factors coming to play.
A drop in domestic demand and investment, and an increase in costs are affecting its economy.
China hopes that development would include the western part of the county, traditionally considered backward. Xi Jinping seeks to revive the ancient Silk Route, aiming to connect mainland Asia with Europe, by land and sea.
China and Japan have signed agreements with India to invest staggering amounts on long-term projects, starting from 2015, with the year seeing FDI increase to $36bn against $27bn in the current year.
