FT : Goldman Way Bullish On India

Thursday, January 25, 2007

India will grow at about 8% until 2020, according to a new report by Goldman Sachs that sharply lifts the investment bank’s forecast of the country’s long-term growth rate.  In a 2003 report on the so-called Brics economies of Brazil, Russia, India and China, the bank had predicted a 5% long-term Indian growth rate.  But its new forecast would see India overtake the US to become the largest economy in the world after China by 2042.  Goldman now predicts that India’s economy, measured in absolute dollar terms, will overtake those of Italy, France and the UK by 2017.  It will overtake Germany’s in 12 years and Japan’s in 18.  “There has been a structural increase in India’s potential growth rate since 2003 on the back of high productivity growth,” the report said.  “India’s contribution to world growth will be greater (and faster) than implied in our previous Brics research.” 

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

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