High-growth economies such as India and China, which have been able to manage the effects of the recession, will play major roles during the recovery period.
Anshu Jain, member of the Deutsche Bank management board, and Chanda Kochhar, managing director and chief executive officer of ICICI Bank, agreed on this possibility at the Hindustan Times Leadership Summit 2009 on Saturday.
While addressing a session on Is the Global Economic Recovery for Real? Jain said, “As per our analysis, India and China could be back to contributing 50 per cent of the world’s GDP by 2020, which they did till the 19th century.”
GDP, or gross domestic product, is the final value of all goods manufactured and services generated in a year.
Kochhar said, “The world economic order will change, and power will shift to Asia and emerging economies.”
For India, the growth will largely come from investments in manufacturing and infrastructure. The government has projected a 6-6.5 per cent growth for 2009-10 and targeted a 9 per cent growth rate over the next two years.
But inflation seems to be a concern in India. Jain said, “The amount of liquidity into the system is leading to a fear of a second bubble forming, which the markets are not reflecting.”
Experts feel that India has some structural advantages, such as high savings as a percentage of GDP, low debt-GDP ratio, strong and robust banking system, high domestic consumption and low dependence on exports.
Kochhar said, “The banking system is the heart of the economy, while all other sectors are its limbs. In the West, the problem started with the heart, while in India, the heart continued to pump, enabling other sectors to draw strength from it.”
Jain felt that India would have to focus on three important areas for long-term growth. “Even marginal investments in infrastructure, literacy, environment and afforestation will put India on a faster growth path,” Jain noted.