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India projected to join China in surpassing size of the U.S. economy by 2050

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  • India projected to join China in surpassing size of the U.S. economy by 2050

    MUMBAI: The Indian economy will join that of China in surpassing the size of the U.S. economy by 2050 to become a motor of global growth, according to a new forecast by Goldman Sachs, the investment bank.

    The United States is currently the world's largest economy. Goldman forecasts that the Chinese economy will pass that of the United States around 2035, while India will do the same about a decade later.

    India has moved onto a much faster growth trajectory than the bank had previously expected, fueled by strong and steady productivity gains in its legions of new factories, which are producing everything from brassieres to cars.

    The rise of India will lead to increasing global competition for resources and more pressure on the environment, Goldman said.

    Goldman now expects the Indian economy to grow at 8 percent a year through 2020, higher than the 5.7 percent rate it predicted in 2003. Indian trade has been growing at 25 percent a year since 2003.

    That year it published what is now widely known as the BRICs report, on the rise of Brazil, Russia, India and China. That report helped to galvanize global interest in developing economies and was often cited by investors during the 2006 bullish market in emerging- country stocks.

    Goldman put out a research paper arguing that "India's influence on the world economy will be bigger and quicker than implied" in 2003.

    Not all of that influence will be welcome. Accompanying India's growing prosperity, the bank predicted, will be ravenous demand for resources and a profound impact on the environment.

    As the country's per capita income quadruples between now and 2020, according to the bank, Indians will buy five time more cars and use three times more crude oil than they now do. India imports 70 percent of its oil today, and its increased needs will put it into direct competition with the United States and Europe for access to Middle Eastern oil and energy from other sources.

    Geopolitical strategists have warned that the competition for energy will spur a kind of diplomatic race to the bottom, in which India and China woo diplomatically isolated, energy-rich nations like Iran and Sudan. That, in turn, will make those supplier nations less vulnerable to international pressure on issues like nuclear proliferation or ethnic conflict.

    The Goldman report also contains startling projections of how India's cities, which can barely cope with the teeming millions they already have, are likely to mushroom even further.

    India already has 10 of the 30 fastest- growing cities in the world. Goldman projected that 140 million rural dwellers would migrate to the cities by 2020, and 700 million — a population equivalent to that of all Europe — by 2050.

    But reality could fail to match Goldman's growth forecasts. The report said that inequality in the face of rising aspirations could foment "social tensions, political pressure to slow down the reform process and increasing protectionism."

    "If managed badly," the report said, "this has the potential to kill the growth goose."

    India projected to join China in surpassing size of the U.S. economy by 2050

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