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DIVERGENCE

India’s lead over China as world’s fastest-growing economy will widen in coming years

By Nupur Anand

India’s perch on top as the world’s fastest growing major economy is unlikely to be challenged soon.

Even as the Chinese economy cools due to global trade tensions, India’s GDP growth will hover near 7.5% by 2020, compared with 7.25% in 2019, says a recent report by the Organization for Economic Cooperation and Development (OECD).

The Paris-based think tank expects China’s economy to clock 6% growth in 2020. As a result of the escalating US-China trade war, the economic output in both countries is estimated to be 0.2-0.3% lower in the current financial year than it would otherwise have been.

Hence, the Indian economy’s lead over China, in terms of growth, is widening.

 

This comes as good news for the Indian economy that grew at a six-quarter low of 6.6% in the October-December 2018 period.

“India has the fastest growth among G20 economies…Accommodative monetary policy and additional fiscal support will boost economic growth despite subdued demand from partner countries,” the report added.

This will be aided by higher domestic demand, fiscal and quasi-fiscal stimulus, including new income support measures for rural farmers, and recent structural reforms. At the same time, a fall in oil prices and the appreciation of the rupee will reduce pressures on inflation and the current account deficit.

This contrasts with the Chinese economy, which faces the double whammy of a trade war with the US, and waning economic stimuli. “(There are) Signs of a slowdown including the weakening of private investment, in particular, real estate investment,” the OECD report added.

The China-US trade war is likely to drag down the economies of other nations as well. The global economy is expected to witness a “moderate but fragile growth” for the next two years, the OECD added.