People who have been following me know that I think India is the next big growth economy on the world stage. Not China. India! There are several reasons for this…
Firstly, it will have the largest population by 2100. In fact, it will grow long after China’s population and workforce stagnates, and ultimately declines in the years and decades ahead. Scale is a big deal, as China has proven. It became the second largest economy in the world, despite a GDP per capita of only $6,091 versus the $51,749 for the U.S. So India’s GDP per capita of only $1,503 means little when considering the powerhouse it will become.
Secondly, India has steeply growing workforce trends into at least 2060, as you can see in the chart below.
Not many countries beat that growth trend, and most of the larger countries, like Indonesia or Brazil, peak between 2030 and 2040.
Thirdly, India is only 32% urban. This means it has decades of continued expansion ahead of it before it hits the typical 80% plateau. China, on the other hand, is already 53% urban and has massively over-expanded. It will take a decade to work off China’s unprecedented overinvestment in housing, factories, offices, malls, infrastructure… just everything.
Where China has greatly over-invested, India has greatly under-invested in its infrastructures so there’s much greater opportunity for the country.
I’ve been to India three times in the last eight years. People there have to work so much harder due to the lack of infrastructure. It takes forever to get anywhere. The roads are clogged with cows, elephants, pedestrians, bicycles, motorbikes, and cars. Americans wouldn’t stand a chance navigating this complex maze of chaos.
People in the larger rural areas of the country have to walk long distances for water and firewood. Many have no electricity.
People in the cities often live in holes in the wall — literally — where they combine their store and their bed in a tiny space. More often than not, they have to rig all types of complicated (and dangerous) wiring to tap into the electricity grid.
Without a doubt, these are a very creative people. Just look at the medical advancements they’ve achieved at less than two-thirds the cost… look at the inventions they create to overcome challenges, like bicycle-driven washing machines.
If they just had the infrastructure of countries like Malaysia and China… look out!
And I believe they WILL get there.
One of the signs that make me optimistic about the country and its economy is that they can make movies and TV! These are very creative industries that require complex networks of many specialists in a diverse range of fields, from the most nerdy to the most glamorous.
How many developed countries dominate movies and TV? The U.S., and then more marginally, the French, British, and Italians. India is the only emerging country to excel at this leading edge industry of the future.
I think that when the world sees China’s economy take its big fall over the coming decade, investors will start to look to India for opportunities. If India’s governrnment made greater investments in infrastructure (which it is starting to do), and more important, if it encouraged greater foreign direct investment, India’s economy will thrive.
Already, it’s grown 6% to 8% in the last decade, despite the underinvestment, stultifying bureaucracy and legacy of socialism.
After the next great crash, India will be one of the best countries to invest in for the next global boom. Most emerging countries rely too much on commodity exports and will languish until our 30-year Commodity Cycle bottoms around 2023 or so. Not India. The Indian economy should be first out of the gate, perhaps from as early as late 2016.
First though, the governrnment must get its act together… and this could happen sooner rather than later with a new growth-oriented prime minister, Narendra Modi, likely to be elected in mid-May.
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