In the showdown between the world’s largest planned economy and the planet’s biggest democracy, 2015 will mark a turning point.
India’s economic growth will power past China’s for the first time since 1999 this year, according to the International Monetary Fund’s World Economic Outlook.
India’s growth will climb to 7.5 percent, its fastest pace in five years, from 7.2 percent in 2014, the IMF said. By contrast, China’s growth will slow, easing to 6.8 percent in 2015 from 7.4 percent the prior year. That will be the weakest Chinese growth pace since 1990, in the aftermath of the Tiananmen Square crackdown, the data showed.
The slowdown in China “reflects a move toward a more sustainable pattern of growth that is less reliant on investment,” according to the IMF report. Tempered growth in China will be one culprit behind slowing expansion in emerging markets as a whole in 2015, according to the report.
In India, meanwhile, “growth will benefit from recent policy reforms, a consequent pickup in investment and lower oil prices,” the IMF report says. The nation’s outlook was boosted from prior projections, and the fund also revised India’s growth for 2013 and 2014 upward following a change to national accounts statistics, according to the report.
Whether India’s resurgence can be sustained may be among the topics discussed on Thursday, when Reserve Bank of India Governor Raghuram Rajan is scheduled to debate Harvard professor Larry Summers. The panel is titled: “The New Normal in Asia: Will Growth Inevitably Slow?”