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Roubini: India May Overtake China within a Year

Washington’s Blog

Sunday, September 5, 2010

Nouriel Roubini made an interesting point about India and China this week:

Roubini warned that world growth leader China was too dependent on exports to the struggling West and predicted that within a year its economic growth will be overtaken by India, a huge nation much more reliant on its domestic market for development.

India and China are the two most populous nations on Earth.

The 2009 World Population Datasheet – published by the Population Reference Bureau – states that India will have more people than China within a couple of decades.

India has a very young age demographic, as shown by the following age pyramids:

India Population Pyramid for 1995

Age and sex distribution for the year 1995:

India Population Pyramid for 2000

Age and sex distribution for the year 2000:

India Population Pyramid for 2003

Age and sex distribution for the year 2003:

India Population Pyramid for 2005

Age and sex distribution for the year 2005:

India Population Pyramid for 2010

Age and sex distribution for the year 2010:

India Population Pyramid for 2020

Predicted age and sex distribution for the year 2020:

India Population Pyramid for 2050

Predicted age and sex distribution for the year 2050:

If India’s demand mainly comes from its domestic market – rather than, say, American consumers who are now trying to watch their budget – there is tremendous potential for growth.

Moreover, as the following chart shows, India will have a very low percentage of elderly who need to be taken care of by the young:

Chart 2: Old Age Dependency Ratios for Selected Countries

So India will have even less of a drag on its economy from its elderly population than China, let alone an rapidly-aging countries like Germany or Japan.

Note: This is not to say that India will surpass China as the world’s second biggest economy any time soon. Roubini is talking about the rate of growth, not GDP.