Now the sleeping elephant has woken up and ready to take on the dragon.
India is expected to log a growth of 7.6% this year and 7.7% in 2016, nearly 1.5 percentage points higher than the outlook just four months ago, in a clear sign that it will outpace China quite decisively, as per a UN report released on Tuesday.
In the Mid-Year Update to the World Economic Situation and Prospects 2015, the reason for India’s outlook is credited to changes in the way national income is computed, with no specific mention of policy reforms during one-year of Prime Minister Narendra Modi government being the cause.
The original report of the UN Development Policy and Analysis Division (UNDESA), released in January, had estimated India’s gross domestic product (GDP) growth rate for this year at 5.9% and 6.3% next year.
“This revision mostly reflects a higher growth trajectory in India, where the recent changes in methodology and data sources have resulted in a considerably higher official growth figures for the past two years,” said the latest report.
“India is now projected to grow by 7.6% in 2015 and 7.7% in 2016, surpassing the growth of China,” the report added, in what should come as another major pat for the Bharatiya Janata Party (BJP)-led government that completes one year in office this week.
The latest UN update matches the projections of other international institutions like the World Bank and the International Monetary Fund that have also put India’s growth rate as the fastest, and all of whom have also revised the estimates for India upward.
Last week, in fact, the UN Economic and Social Commission for Asia and the Pacific (ESCAP) also released a report that said the Indian economy would grow by 8.1% this year and 8.2% next year — the highest among the projections made by international institutions.
“Overall, I think the authorities in India have done a very good job over the past two years and this is actually reflected in some indicators,” Ingo Pitterle, a UNDESA Economic Affairs Officer and India expert, said in an interview on Tuesday.
“In 2013 India was grouped together with Turkey, South Africa, Indonesia and Brazil, and considered a fragile economy. And now, you look at the same variables — today, they look very different,” Pitterle said.
“When you look at the currencies the story is India’s is the only currency that has held up well here, which is a sign of confidence by investors, by the international community, in the Indian economy,” he said.
Like the UN report’s outlook, Pitterle saw several positives on the Indian economy. The rupee, had done better than most currencies, inflation was down, monetary policy was prudent, current account deficit had declined, external imbalances had reduced and oil prices had softened.
“The changes that are being made are all going in the right direction, both by the government and by the central bank. I have been following the Indian economy now for seven years or so. I see a return to a high degree of macro-economic stability.”
Asked about the differences in India’s growth projections, Pitterle said he did not believe that a growth of 8.1% or 7.6% really mattered — neiher in the medium term, nor in the long run.
“What is important is that it is balanced growth, that it is the same (level of) growth, that it can really have 5-10 years of this high growth period, without major disruption, without causing excessive inflation, or other imbalances.”