Race to be the Largest Economy

It is needless to say that after a gloomy performance by the world economy, it is expected that the Emerging economies are set to grow faster than the developed economies in the coming few decades. The slow growth in the super power the united states along with the second recession which hit the European nations have made it amply clear that the growth of the developed economies have been paralyzed. Thanks to the global happenings. The growth rate by which the world economy is expected to grow in 2012-13 is majorly contributed by the emerging economies like India, China, etc. It is expected that India is likely to become one of the three largest economies by 2050 and the country will drive the growth of the world economy as a whole in future.

Read Why we think India will be the Best Performing BRIC Country in 2013.

In order to answer the question “Which Country will emerge as the Winner in the Race to be the Largest Economy”, given below is an analysis based on certain factors:

i) Global Economies

In a recent report it was mentioned that the global financial crisis has led to a decline in the growth of the developed economies like US. Also the crisis has shifted the growth acceleration towards the emerging economies which are going to become the epicenter on the global financial markets sooner or later. It is expected that the Chinese economy will surpass US economy to become the largest economy in the world by 2050.

It is expected that by the year 2050, emerging markets will lead the race by China being the largest, followed by US and the Indian economy at the third place. Among the BRICS economy, Brazil is likely to follow the Indian economy to be at no. 4 replacing Japan.

Among the European economies, Turkey is a good bet currently with high prospects of emerging as one of the largest European economy. Also countries like Indonesia, Nigeria, and Vietnam are some of the strong contenders for the race.

ii) Purchasing Power Parity

In terms of purchasing power parity, if we project the growth of the emerging economies we will find China topping the list, followed by US and India at third place. These economies are expected to outcast Brazil by a huge margin which will be at fourth place ahead of Japan by 2050. Countries like Russia, Mexico, and Indonesia could show tremendous growth and could very well surpass the sustained growth of developed economies of today Germany or the UK only to surpass them in the long run.

iii) Economic Growth

It is undisputed that the global financial crisis has hit the G7 much harder than the E7 in the short term. And also the current growth of the global economy which is recorded close to ~3% is majorly contributed by the sufficient yet slow growth of two of the largest emerging economies from the Asian continent, China and India. According to the World Bank and United Nations, the growth of the global economy is expected to happen by ~3.2% in the coming fiscal which will be mainly contributed by the Indian economy, expected to grow at ~7% in the coming fiscal. The global crisis has, undoubtedly, caused downward revisions in the estimates of longer term trend growth in the G7, particularly in the case of Europe and the US. Excessive relying on the public and private borrowing to drive growth by these economies has led to a second recession in the European Zone which contracted by ~0.2% this fiscal.

iv) Macroeconomic and Political Factors

Further, for the growth of emerging market too, a number of macroeconomic and political instability factors prevail which could challenge the growth of these economies. Thus the road ahead for the emerging economies is not equally good and a need of proper policy formation and implementation to the maximum is the need of the hour. For the economies like ours and Brazil, high fiscal deficits is one of the biggest and most important challenge; for Russia and Nigeria, over-reliance on oil and gas revenues is the rising concern. Rising income inequality which leads to social tension is one of the major concerns for the Chinese nation.

Thus at last it can be said that the future for the emerging economies looks pretty bright at this point, but the road ahead is certainly not that easy as it seems.