India's growth set to overtake China

New Delhi: India, now in a 'sweet spot' economically, is set to move on to double digit growth despite politics and populism and may be ahead of China's growth by 2010.

"The hype about India is real. Factors are in place to sustain 10 per cent plus growth. Investment at over 40 per cent of GDP this year is one of fastest jumps in history," renowned economist Surjit Bhalla said in his mid-term review of the economy.

The mid-term review showed that India was poised to achieve a high level of growth as savings and investment rates were steadily rising.

The steady increase in savings and investment to 40 per cent and an additional 3 to 4 per extra growth from extra investment would result in a 10 per cent GDP growth.

Bhalla also felt the exchange rate should be kept undervalued to make India more competitive in the global market.

He said for the last three-years, the growth in manufacturing had been greater than 10 per cent and overall industrial growth has been over 9 per cent and sustained progress in these sectors could push the GDP growth further.

Bhalla said that India had a 5 to 10 year lag when compared with China. But while comparing the two countries it's forgotten that China is at an income level and middle class level that is almost twice that of India. But the level of poverty in the two countries is almost the same, Bhalla said.

Though the poverty level in India is put at 22 per cent of the population, it in fact must be much less at five per cent if correctives were carried out in the methodology of the calculation.

When the correctives are applied, the poverty level at five per cent would be on par with that of China. The methodology adopted in India presently was based on average survey of consumption expenditure of people. But consumption expenditure in India does not take into account 55 per cent of national accounts consumption, he said, adding that the present methodology grossly overestimates poverty level.

Inequality has also been steady for 25 years after declining between year 1950 to 1983 and employment growth stands at 2.5 per cent per annum, he said.