Dec. 3 (Bloomberg) -- India’s economy may expand more than China’s in the next 10 years if the world’s second-most populous nation lifts curbs on foreign investment in retail and boosts spending on roads and bridges, Nouriel Roubini said.
“I’m very optimistic about India’s future growth” because the economy is driven by domestic demand while China relies more on exports, the New York University professor and chairman of Roubini Global Economics who predicted the global financial crisis said in New Delhi yesterday. “The challenge for India will be to sustain 9 percent growth and at the same time keep inflation under control.”
Roubini joins Morgan Stanley in predicting India will grow faster than China. Prime Minister Manmohan Singh’s government plans to double spending on roads, ports and power plants to $1 trillion in the five years to 2017 to improve the quality of India’s infrastructure, which is ranked below Sri Lanka and war-ravaged Ivory Coast.
The South Asian country’s gross domestic product climbed 8.9 percent for a second straight quarter in July to September, the government said this week. O.P. Bhatt, chairman at the State Bank of India, the country’s biggest, said today 10 percent growth for the nation “is inevitable.”
Indian laws, aimed at protecting small store owners, limit overseas investment to single-brand retail or wholesale operations. Wal-Mart Stores Inc., the world’s largest retailer, and rivals including Carrefour SA and Tesco Plc are pushing the government to allow foreign investment after the trade ministry invited views from the industry on removing the restriction.
Wal-Mart Chief Executive Officer Michael Duke said in October he is “optimistic” that non-Indian companies will be allowed to invest in the country. Organized retail may create as many as 3 million jobs in the next five years in India, according to Duke.
India’s economy bucked a growth slowdown in Asian neighbors from Thailand to Malaysia, where currency appreciation and risks to exports from Europe’s debt crisis and U.S. unemployment have clouded the outlook.
India’s factory output last month grew at the fastest pace in six months, according to the Purchasing Managers’ Index compiled by HSBC Holdings Plc and Markit Economics. The nation’s service industry expanded at the quickest pace in four months in November, the companies said in a statement today. Exports in October grew 21.3 percent, a separate report showed.
“China is likely to slow in the coming years gradually and India’s growth is likely to accelerate,” boosted by a young population and higher consumption, Roubini said.
India will add 136 million workers, more than the population of Japan, by 2020 compared with 23 million for China, Morgan Stanley economist Chetan Ahya said in August. That will help the nation tap into a rising pool of savings and help finance infrastructure projects, he said.
Morgan Stanley expects India to overtake China as the world’s fastest-growing major economy by 2015. India’s growth may accelerate to 9.5 percent between 2011 and 2015, Ahya said.
India can sustain a growth rate of 9 percent by raising productivity and addressing supply-side issues, Roubini said yesterday.
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