India may top China’s GDP growth in ’07

HONG KONG: If economic growth is a Formula 1 race, China has been outpacing India for over two decades. But now, at least one punter is betting that India will record a faster lap as early as next year.

On Wednesday, Credit Suisse revised GDP growth projections for Asian economies for 2007. Perhaps the most striking statistic is that India’s GDP growth for 2007 could, for the first time, be higher than China’s and reach double digits.

“Our significant growth upgrade for 2007 is in India,” says Credit Suisse chief Asia economist Dong Tao in his Asia Economics report. India’s GDP growth projection for next year has been bumped up from 8.5% to 10%. And though the forecast for China’s GDP growth too has been revised upwards by 0.1 percentage point, it is projected to fall a notch lower than India’s, at 9.9%.

DNA has learnt that one other international bank is revising India’s GDP projection for 2007 upwards.

Credit Suisse’s projections for 2008 read even better from an Indian perspective: it forecasts that India’s GDP will grow 10.5% that year, ahead of China’s 10.2%. 

Finance Minister P Chidambaram had said in Parliament on Tuesday that the economy is “firing on all cylinders”.  And, in an interview to the Wall Street Journal, he had said that the economy could accelerate to more than 10% per annum for the next five years.

India’s anticipated emergence as the top growth performer in the region is driven by strong domestic consumption and public investment, says Dong. China, on the other hand, is taking its foot off the accelerator and cooling down the economy, and this will “create room to unwind the tightening” in 2007.

Credit Suisse revised Asia’s GDP growth projections from 7.4% to 7.9% for 2007 and to 8.3% for 2008.

The report says that although inflation remains benign across the region, “we expect incremental interest rate hikes in India and China”. External liquidity remains strong in the region, except in India, it adds.