Reversal of fortune! India’s per capita income to grow 3.5% faster than China: Brookings Institution

Factors that support India’s economic momentum are strong investments in labour and human capital

India's per-capita income is expected to grow at an average 3.5 percent faster rate than that in China on account of strong investments in labour, human capital and structural reforms since 2014, bridging the gap between the two countries, according to an analysis published by Brookings Institution.

“This starts a reversal of fortune! Economic momentum has shifted towards India – as India is expected to lead the global growth story while China slows and becomes a drag on the global economic growth. India is likely to continue to grow faster than China for the next two decades bridging the gap between per-capita incomes in both these countries,” the analysis said.

The new analysis published by Brookings Institution compares India and China’s per-capita income.

“Factors that support India’s economic momentum are strong investments in labour and human capital, particularly in Science, Technology Engineering, and Mathematics (STEM), massive upgrading of physical capital in India and higher productivity. Over the last 20 years, India’s total factor productivity exceeded that of China by 0.5 percent per annum and in the last 10 years excess Total factor productivity (TFP) growth was 1.5 per cent per annum,” it said.

Based on these calculations, a conservative estimate suggests that India's per-capita incomes are expected to grow at an average 3.5 percent faster rate than that in China. India will take anywhere between 19 and 22 years from 2023 for its per-capita income to be the same as that in China, it added.

“The analysis looks at India-China growth forecasts and shows how within 25 years of 2019, India would achieve the same gross domestic product (GDP) per-capita level as that of China. Based on different growth projections, India will take anywhere between 19 to 22 years from 2023 for its per-capita income to be the same as that in China,” it said.

Strong structural reforms undertaken by India since 2014 have contributed to its growth momentum and have helped India’s per-capita income grow faster than that in China for the first time since the 1960s, Brookings Institution said.

The analysis reveals that between 2010 and 2019, per-capita GDP growth in India was higher than that in China for the first decade after the 1960s. Between 2010 and 2019, India’s purchasing power parity (PPP) per capita income grew at 5.2 percent versus 4.5 percent in China.