A recent Goldman Sachs study projected that India, along with China, will surpass the US economy by 2050 as India has moved onto a much faster trajectory fueled by strong and steady manufacturing productivity gains. The investment banker said that China will surpass the US by 2035 and India by 2045.
With trade growing at 25%, the study projects a gross domestic product (GDP) growth rate of 8% Goldman Sachs’s BRIC (Brazil, Russia, India, China) report says that “India’s influence on the world economy will be bigger and quicker than implied in 2003.” At that time, the BRIC report projected a 5.7% GDP growth rate for India. India’s urban growth is also expected to be staggering. Already home to 10 of the 30 fastest-growing cities in the world, the report projected that 140 million rural dwellers would migrate to the cities by 2020 and 700 million will live in cities by 2050.
The report also projected unfortunate side effects of this rapid growth. Firstly, the growth will lead to increasing global competition for resources and bring profound impact on the environment since India’s per capital income will quadruple by 2020 and there will be five times more cars using three times more crude oil. Since India imports 70% of its oil, the rising demand will bring it into direct competition with the US and Europe for access to West Asian oil and natural gas resources. Secondly, the race for energy will also drive India and China to court with diplomatically isolated regimes in Iran and Sudan for access to there large energy reserves. Emboldened with such interactions, Goldman Sachs says that these regimes will become less vulnerable to international pressure on nuclear proliferation and ethnic conflict.
The BRIC report also warns that the projections could fail for many reasons. Firstly, inability of the political class to deal with inequality of rising aspirations born out of this rapid could foment "social tensions” and thereby arrest growth. Secondly, “political pressure to slow down the reform process and increasing protectionism” will affect inflow of investments and greatly increase current account deficit, weaken the currency, increase inflation, and cause the economy to implode. Thirdly, politically inspired shortcuts have “the potential to kill the growth goose."