India rising.pdf

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India rising: A medium-term perspective
l May 19, 2005
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• India e a long way from its inward-looking economic strategy of over 50
years ago. Economic liberalisation and the gradual opening up to the world have
boosted growth and lifted millions of people out of poverty. This paper argues that
the continuation of the reform process will allow India to stay on a high growth
path of roughly 6% per year on average over the next 10 to 15 years. If reforms
were pursued more aggressively, real GDP growth could reach 7%-8% per year.
• India will thus e the fastest growing economy out of 34 developed and
emerging markets during that period and the world’s third largest economy by
2020. Moreover, its GDP per capita will double, from roughly USD 2,500 today (at
purchasing power parity) to almost USD 5,000 in 2020. Favourable demograph-
Editor ics, increasing investment in education and infrastructure and further integration
Maria L. Lanzeni with the world economy are the factors behind our projections.
+49 69 910-31723 • The implications of the projected growth trajectory are manifold. First, a larger,
maria-@
richer consumer market will emerge. Second, consumption patterns will change,
Technical Assistant with expenditure on healthcare and transport munications growing sub-
Bettina Giesel
+49 69 910-31745 stantially. Third, household savings will increase, given the large amount of peo-
@ ple entering the working years phase. Fourth, there will be rising demand for di-
versified financial instruments to invest those savings.
Deutsche Bank Research
Frankfurt am Main • IT-related services, textiles, the auto-ancillary industry and pharmaceuticals are
Germany expected to gain dynamism given India’parative advantages and current
: toral trends. The banking sector has an enormous