According to HSBC Holdings Plc, the exceptional recent economic progress of India is unlikely to replace China as the world economy’s main growth engine anytime soon.
Economists Frederic Neumann and Justin Feng wrote in a report Friday, “The numbers don’t exactly add up.”
At the moment, India runs on too few cylinders, while China is simply too large to have its importance for the world economy readily eclipsed, they said.
HSBC predicts the gap between the two economies to continue to broaden in the foreseeable future, growing to $17.5 trillion by 2028, based on IMF forecasts. That is equal to the recent size of the European Union’s economy. Last year, the gap between the two stood at $15 trillion.
The bank’s take is in stark contrast to the bullish view by others, such as Barclays Plc., that earlier this week said a continued 8 percent growth for India will allow it to topple China as a global growth driver in the next five years.
The HSBC report also emphasizes the difference in consumption and investment trends between the two Asian giants.
Even assuming zero expansion in China, and a tripling of investment spending gain in India from its current average, it would take another 18 years before India’s investment spending catches up to China’s, the economists wrote.
China, currently, accounts for about 30 percent of world investment, while India’s share is less than 5 percent. Its share in global consumption also stands below 4 percent, compared to China’s 14 percent.
Despite this, the economists do predict India will make a heavy contribution to global demand for commodities, consumption, and capital goods, making the HSBC economists “bullish” on India.
