India far from replacing China as world's growth driver: HSBC
What's the story
India's recent economic progress has been impressive, but HSBC Holdings Plc. suggests the country isn't quite ready to replace China as the world's growth engine.
In a report, economists Frederic Neumann and Justin Feng wrote that India "runs on too few cylinders" and that China is "simply too large to have its importance for the world economy readily eclipsed."
HSBC predicts that the gap between the two economies will keep growing, hitting $17.5 trillion by 2028, based on IMF forecasts.
Details
Contrasting views on India's potential for growth
This view from HSBC is at odds with other financial institutions like Barclays Plc., which earlier this week suggested that a consistent 8% growth for India could help it surpass China as a global growth leader within the next five years.
These differing opinions underscore the ongoing debate about India's economic growth potential and its ability to compete with China on the world stage.
What Next?
Differences in consumption and investment trends
HSBC's report also highlights the differences in consumption and investment trends between India and China.
Even if China's growth came to a standstill and India tripled its investment spending growth from recent averages, it would still take 18 years for India's investment spending to catch up to China's.
Currently, China makes up about 30% of global investment, while India's share is less than 5%. When it comes to global consumption, India accounts for less than 4%, compared to China's 14%.
Insights
HSBC is still bullish on India
Despite these disparities, HSBC economists remain "bullish on India," expecting the country to make significant contributions to global demand for commodities, consumption, and capital goods.
They predict that India will become a more prominent player in global trade, possibly achieving a similar role in services exports as China currently holds in goods supply chains.
Facts
IMF's forecast on India and China's growth
The International Monetary Fund (IMF) projects India's economy to grow at 6.3% in both 2023 and 2024, while China's economy is expected to grow at 5% and 4.2% during the same period.
These projections further fuel the ongoing conversation about whether India can challenge China's position as the world's leading growth engine.