In a compelling turn of events, India is projected to experience per capita income growth at an impressive 3.5 percent faster rate than China, according to a comprehensive analysis released by the esteemed Brookings Institution. This remarkable shift can be attributed to India’s steadfast investments in labor, human capital, and structural reforms initiated since 2014, which are rapidly closing the economic gap between the two nations.
Brookings Institution’s analysis heralds a reversal of fortunes, with India poised to take the lead in the global growth narrative while China grapples with a slowdown, ultimately becoming a drag on the world’s economic momentum. India’s continued outperformance of China is expected to persist for the next two decades, progressively bridging the disparity in per capita incomes between the two nations.
The report underscores the critical factors propelling India’s economic ascent, emphasizing substantial investments in labor and human capital, notably in Science, Technology, Engineering, and Mathematics (STEM) fields. Additionally, India has undertaken massive upgrades in its physical capital and has exhibited higher productivity. Notably, over the past two decades, India has consistently surpassed China in total factor productivity growth, with the last decade witnessing an impressive excess Total Factor Productivity (TFP) growth rate of 1.5 percent per annum.
Based on these meticulous calculations, a conservative estimate anticipates that India’s per capita incomes will grow at an average rate 3.5 percent faster than China’s. Consequently, India is projected to reach parity with China in terms of per capita income within a timeframe spanning 19 to 22 years from 2023.
This analysis also scrutinizes growth forecasts for India and China, offering insights into how India, within a quarter-century from 2019, is poised to achieve the same Gross Domestic Product (GDP) per capita level as that of China. Depending on distinct growth projections, India is expected to attain this milestone within a span of 19 to 22 years from 2023.
The report places strong emphasis on the structural reforms initiated by India since 2014, attributing them as pivotal contributors to the nation’s growth momentum. These reforms have propelled India’s per capita income growth to surpass China’s for the first time since the 1960s. Notably, between 2010 and 2019, India experienced higher per capita GDP growth compared to China, marking a transformative shift in economic dynamics. During this period, India’s Purchasing Power Parity (PPP) per capita income expanded at an impressive rate of 5.2 percent, outstripping China’s growth rate of 4.5 percent.
In essence, India’s remarkable journey towards economic parity with China, fueled by prudent investments and structural reforms, heralds a promising era of economic prominence on the global stage.
