India poised to become the Fastest Growing Economy of the World

India may overtake China as the world’s fastest growing major economy by 2015, as the South Asian nation doubles infrastructure investment and adds six-fold more workers than its northern neighbor, Morgan Stanley said.

India’s growth may accelerate to 9-9.5% over 2013-15, Morgan Stanley economist Chetan Ahya (managing director for Asia and India economist, who writes a monthly column for ET) said in an interview held at Singapore on Monday. India’s gross domestic product has expanded at an average 7.1% over the decade through the third quarter of 2009, compared with 9.1% in China, which surpassed Japan as the second-largest economy last quarter.

Prime Minister Manmohan Singh’s government plans to double spending on roads, ports and power plants to US$1-trillion in the five years to 2017 to improve the quality of infrastructure that’s ranked below war-ravaged Ivory Coast and Sri Lanka. An increasing number of people joining the workforce and rising salaries will also help boost growth, Mr. Ahya said.

Within the next two years, India will start matching China’s growth rate, Mr. Ahya said. After that “there will be a clear divergence of growth rates between the two countries,” he said.

India will add 136 million workers, more than the population of Japan, by 2020 compared with 23 million that China will add, Mr. Ahya said. That will help the nation tap into a rising pool of savings and help finance infrastructure projects, he said.

Poor transport and lack of other facilities in India could cost 1.1 percentage points of growth, or US$200-billion in fiscal 2017, McKinsey & Co. said in a report last year.

India is ranked 89 out of 133 nations for its infrastructure, according to the World Economic Forum’s Global Competitiveness Index.

India’s US$1.3-trillion economy may accelerate to 8.5% in the year starting April 1 as Asia’s third-largest economy rebounds from the global recession, Prime Minister Singh said on March 23.

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