India’s government is talking big, setting a goal to become the world’s most rapidly growing economy within the next four years after a government report showed India’s GDP growth rate likely to accelerate to 8.2% for the financial year starting April 1st, 2010.
The finance ministry report yesterday said India’s $1.2 trillion economy may “breach” a 9 per cent growth pace by March 2012, citing the country’s savings rates that now match the range of those in Japan, South Korea and Malaysia.
India’s savings rate is at 32.5 per cent of GDP compared with 28 per cent in Japan, 30 per cent in South Korea and 38 per cent in Malaysia, according to the report.
Higher savings by young working Indians “augurs well for the Indian economy,” the finance ministry report said. India will add 220 million people to its working-age population by 2030, according to Reserve Bank of India estimates, a lure for overseas businesses.
“Savings is the key factor that will propel India’s growth story,” Tushar Poddar, a Mumbai-based economist at Goldman Sachs Group Inc. said in a telephone interview. “favourable demographics will boost savings and add to the growth momentum.” Poddar expects India’s savings rate to rise to 40 per cent of GDP by 2015.
In the long-game, demographics make India a shoe-in due to the disastrous effects of China’s One Child Policy. We’re just not so sure India can hit its target so soon barring a major China slow-down. One key problem with the Indian economy is that it still is far too dependent on the weather due to its relatively large reliance on agriculture. Thus growth can at times be completely outside of their control.