Growth of World Economy Post Crisis, will India be a loser and China's surge continues unabated?

India a loser Post Crisis

Currently the world economy is in the phase of recovery from past crisis. Let us look at the prospects of the world economy once it recovers from the crisis and where would the Indian economy figure itself in the emerging global scenario.

The Organization for Economic Co-operation and Development (OECD) recently came out with their forecast for the long term growth until the year 2060. The forecasts indicates India to be a loser on few fronts after the crisis scenario and thus it will take longer for the nation to take up with other advanced economies. In contrast to the Indian economy, the OECD believes that China’s surge will continue unabated.

The global boom of the last decade is unlikely to recur, that is for sure.

OECD sees the world economy to return soon to the average growth rate of the past decade and a half.

• During the period of 1995-2011, the world economy grew at 3.5% in purchasing-power-parity terms.
• It is expected that the economy would grow at 3.7% up to 2030.

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World Economy Post Crisis Period

Considering the fact that the period of 1995-2011 saw some of the worst crisis ever like East Asian crisis and the Russian default, the internet bubble and the sub prime crisis, etc. the growth in the coming years is pretty optimistic. Some of the facts:

i) Eurozone is in recession which is not expected to return to modest growth for at least another half a decade  and

ii) US growth is anemic since five years after the crisis

the expected growth rate of the 3.7% for the global economy very well indicates the role of emerging economy in the overall development and growth of the world economy.

It turns out that it is the emerging economies that will power global growth in the years to come despite the fact that a slowdown in the group will be seen witnessing a growth of nearly 6% until 2030 from the current 7%.

Pattern of savings too will play an important role in the growth of the economy. If we talk about the Indian and Chinese economy, we could estimate approximately 50% of the global saving by 2030 to be coming from these two conservative countries which focus more on savings. This will obviously widen the global imbalance in the world economy and again a phase of crisis may be reached.

Conclusion

Thus it can be concluded that the world economy will soon see a great global crisis. Greater fiscal consolidation in the developed world is the key to preventing another crisis which can only be achieved with the help of proper monetary and fiscal policies to be implemented in the countries. Banking sector is of much priority if crisis is to be overcome and in order for the banking industry to operate fine, risk management and capital adequacy is the need for the hour. Credit Rating too would also come handy in such a scenario, to ensure proper deployment of funds in assets which has the least probability of turning junk thus ensuring highest safety to the investments and savings. Special attention to real estate and services needs to be given in this period to prevent another crisis on the lines of education loan and housing loan.

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