Economic Future of India & China: 2023 and Beyond

The IMF said in its latest outlook ?that the global economy will experience a deeper slowdown next year and that global growth could fall to 2.7% in 2023

projected in October that global growth will fall to 2.7% in 2023. “The worst is yet to come, and for many people, 2023 will feel like a recession,” noting the slowdown “will be broad-based” and may “reopen economic wounds that were only partially healed post-pandemic, the IMF said.[i] The Centre for Economics and Business Research (CEBR) also predicts that the global economy will enter a recession in 2023. [ii]

But India will see impressive economic growth next year.

Although the world economy faces a recession in 2023, S&P Global Pegs India’s growth is at 7% for 2022, and 6% for 2023.[iii]

?

As multinationals are diversifying supply chains away from China, many are moving to India.

Shortly, India will have a strong middle class driving most consumer spending. The CEBR predicts that India will become the third $10 trillion economy in 2035, and the world's third largest by 2032[iv]

Today, it is trying to unseat China in higher-end manufacturing. India’s long-term future is bright.

Meanwhile, China’s economy faces severe strains from the new Omicron variant to a severe property sector downturn. Economic growth is expected to fall this year and next, according to the latest World Bank cut forecast. It cut its 2022 forecast from 5.4% to 5.1%, which would mark the second slowest pace of growth for China since 1990.[v]

Despite facing headwinds and a harsher external environment, China's economy is set to recover steadily next year. It plans to ease these restrictions, even as case numbers remain high. Certainly, it revives slumping business activity and the economy will recover next year. Morgan Stanley raised the forecast for the GDP next year to 5.4 percent from 5 percent previously.[vi] The International Monetary Fund in October cut its growth forecasts for China for this year and 2023 as strict Covid curbs and a crisis in the property sector fuel a slowdown in the world’s?number two economy.

China’s gross domestic product is expected to expand 3.2 percent this year, the IMF said in its quarterly global forecast, down 0.1 percentage point from its previous forecast in July.

That would be the country’s weakest growth in around four decades, excluding the first year of the pandemic, according to data from the government and the World Bank.

The IMF said growth would pick up to 4.4 percent next year, though that would still be a 0.2 percentage point drop on its previous estimate.

Both figures are well below Beijing’s?stated GDP growth?target for this year of around 5.5 percent, a figure many analysts believe is now unattainable.[vii]

China’s economy is seen rebounding at a faster-than-expected pace next year. Standard Chartered predicts that China's economy will grow by 4.5% in 2023. [viii]

?

?

Although China faces formidable economic challenges, it has a bright future in the long term.

By 2031, Bloomberg Economics forecasts, China will have overtaken the US to become the world’s biggest economy, The United States held the top spot for well over a century. [ix]

The CEBR now predicts that it will happen in 2036. This revised view reflects the increased hit to the Chinese economy from the country’s zero Covid policy, and increased trade tensions between China and the West Two years ago, it expected that it would overtake the US in 2028. Last year, CEBR moved the forecast out to 2030.

Earlier, the PwC had predicted that the world economy will double in size by 2042, growing at an average real rate of 2.5% annually from 2017 to 2050. This growth will be driven by emerging market and developing countries, with the E7 economies of Brazil, China, India, Indonesia, Mexico, Russia, and Turkey growing at an annual average rate of 3.5% over the next 33 years, compared to only 1.6% for the advanced G7 nations of Canada, France, Germany, Italy, Japan, the UK, and the US[x]

?

In the long-term future, both India and China will profit from what is called Asia’s Century as the continent returns to the center of the global economy. There will occur a historic shift in relative power between countries.

?

Earlier, Kishore Mahbubani, in his article entitled “Why the 21st Century will be an Asian one” published on February 21, 2022, said that:

Most thoughtful observers know in their gut that the 21st century will be the Asian century. Data backs this up. As recently as the year 2000 (when the 21st century began), the combined gross domestic product (GDP) of the countries which make up the Asian group in the United Nations was US$9.5 trillion. This was lower than the combined GDP of North America (US$11 trillion) and Europe (US$9.7 trillion). Hence, Asia was No. 3. But by 2020, barely 20 years later, Asia had become No. 1 (at $32.8 trillion), North America ($22.7 trillion), and Europe ($20.8 trillion) had become No. 2 and No. 3, respectively. Most thoughtful observers predict that the trend will continue. PwC has predicted that by 2050, the top five economies (in purchasing power parity terms) will be China, India, the US, Indonesia, and Brazil. Three of the top five will be Asian. Not one European country will be on this list. Surely the chemistry and texture of the 21st century will be very different from the previous two centuries…. Economic power has shifted East. …Yet, it is significant that virtually all of China’s neighbors are working on the assumption that China will succeed. …. In short, Asia is betting that the 21st century will be the Asian century. This is why many people around the world feel that the 21st century will be the Asian 21st Century.

Undoubtedly, the 21st century will belong to Asia. That much is inevitable.

?

?

?

[i] Julia Horowitz, “Here’s what could tip the global economy into recession in 2023”, CNN, Here's what could tip the global economy into recession in 2023 | CNN Business

?

[ii] CEBR: The global economy will enter recession in 2023 and there will be significant changes in the list of the world’s largest economies in the 15-year post-recession period, CEBR: The global economy will enter recession in 2023 and there will be significant changes in the list of the world's largest economies in the 15-year post-recession period | Karen Audit

[iii] S&P Global Pegs India’s Growth At 7% For 2022, 6% For 2023, India.com, S&P Global Pegs India’s Growth At 7% For 2022, 6% for 2023 | India.com

[iv] India to become $10-trillion economy by 2035: CEBR, Economic Times, India Economy: India to become $10-trillion economy by 2035: CEBR - The Economic Times (indiatimes.com)

[v] Laura He, China’s economic growth will slow sharply in 2022, World Bank says, CNN Business, December 22, 2021,China's economic growth will slow sharply in 2022, World Bank says | CNN Business

[vi] Morgan Stanley upgrades its 2023 growth outlook for China, expects stronger and earlier rebound, Morgan Stanley upgrades its 2023 growth outlook for China (cnbc.com)

?

[vii] AFP, “IMF Cuts China Growth Forecasts For 2022, 2023”, Insider Paper, October 11, 2022,

IMF Cuts China Growth Forecasts For 2022, 2023 - Insider Paper

[viii] Lisa Levin, “China's Economy Set To Grow By This Percentage Rate In 2023, Says Standard Chartered”, December 28, 2022, China's Economy Set To Grow By This Percentage Rate In 2023, Says Standard Chartered - Benzinga

[ix] “When will China overtake the US to become the world’s biggest economy?”, scmp.com, July 7, 2021, When will China overtake the US to become the world’s biggest economy? | South China Morning Post (scmp.com)

[x] World economy predicted to double in size by 2042 Futuretimeonline.net, February 9, 2017, World economy predicted to double in size by 2042 (futuretimeline.net)

?