India to overtake US by 2050; may even beat China: PwC

For those obsessed with India's status as a rising superpower, there is more good news - the country might overtake the USA to emerge as the world's second largest economy by 2050, according to a report published by PricewaterhouseCoopers (PwC).

Calculated on a purchasing power parity basis, the country has the potential to be the fastest growing large economy by that year, and could even supersede China to the top spot, the report says.

China of course remains well ahead for the near future - it is expected to overtake the US as the world's largest economy sometime before 2020, according to 'The World in 2050' report released by PwC today.

The report says India, which was at the fourth position in terms of purchasing power parity in 2009, will move to the second rank by 2050, after China. The US will slip to the third spot.

India's GDP at constant 2009 prices is estimated to grow from $3,752 billion to $43,180 billion, emerging also as the world's second largest economy by 2050.

China will be the world's leading economy with a GDP of $59,475 billion by 2050.

The United States, currently the world's largest economy, will be relegated to the third spot, after India, with a GDP of $37,876 billion while Brazil with a GDP of $9,762 billion will take the fourth spot.

Japan, currently, the third largest economy after the US and China, will be the fifth-largest economy with a GDP of $7,664 billion against its current GDP of 4,138 billion.

The most significant increases in share of world GDP at market exchange rates (MERs) are projected to be achieved by India. In 2009, India's share of world GDP at MERs was just 2 per cent. By 2050, this share could grow to around 13 per cent, according to the report.

The dollar-rupee parity, however, is expected give the US an edge over India with its GDP rising to $37,876 billion while India's GDP falling to $31,313 at constant 2009 market exchange rate (MER) value of the rupee.

China will still retain the Number 1 spot with a GDP of $51, 180 billion by 2050.

Releasing the report in New Delhi, Jairaj Purandare, PwC India regional managing partner and leader (markets and industries) said, ''The global financial crisis has further accelerated the shift in economic power to the emerging economies. India, helped by its strong demographic dividend, is poised to overtake the US to emerge as the second largest economy in purchasing power parity terms by 2050.''

He added, ''Over the coming decade, the Indian economy is likely to become less dependent on outsourcing and more focused on manufacturing exports, building on its strong engineering skills and the rising levels of education of its population.''

In the course of this process, India is likely to build on its strong engineering skills and rising levels of education over the next decade. Consumer markets in major Indian cities will also become increasingly attractive to international companies as the size of the middle class there grows rapidly over time. India's growth trend is expected to overtake China's trend at some point during the coming decade due to India having a significantly younger and faster growing working-age population than China and due to it having more potential for growth, as it is starting from a lower level of economic development than China.

However, the report says India will only fully realise its potential if it continues to pursue the growth-friendly economic policies of the last two decades. Particular priorities would be maintaining a prudent fiscal policy, further extending its openness to foreign trade and investment, significantly increasing investment in transport and energy infrastructure, and improving education standards, particularly for women and those in rural areas.

John Hawksworth, chief economist, PwC UK, said, ''In many ways the renewed dominance by 2050 of China and India, with their much larger populations, is a return to the historical norm prior to the Industrial Revolution of the late 18th and 19th centuries that caused a shift in global economic power from Asia to Western Europe and the US - this temporary shift in power is now going into reverse.''