Financial Times

India on track to be global economic power

25 January 2007

By: Jo Johnson (New Delhi)

India will grow at about 8 per cent until 2020, according to a new report by Goldman Sachs that sharply lifts the investment bank’s forecast of the country’s long-term growth rate.

In a 2003 report on the so-called Brics economies of Brazil, Russia, India and China, the bank had predicted a 5 per cent long-term Indian growth rate. But its new forecast would see India overtake the US to become the largest economy in the world after China by 2042.

Goldman now predicts that India’s economy, measured in absolute dollar terms, will overtake those of Italy, France and the UK by 2017. It will overtake Germany’s in 12 years and Japan’s in 18. "There has been a structural increase in India’s potential growth rate since 2003 on the back of high productivity growth," the report said. "India’s contribution to world growth will be greater (and faster) than implied in our previous Brics research." While many economists regard Goldman’s Brics research mainly as a successful marketing tool for the investment bank, many in India see it as literal confirmation of the country’s destiny as an economic superpower.

"We no longer discuss the future of India. We say: 'The future is India,' Kamal Nath, commerce minister said in a recent speech. Although per capita incomes in India will continue to trail far behind those of the developed world for the foreseeable future, the latest Brics forecast will fuel what many see as excessive exuberance about the country’s prospects.

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