Strengths of Indian Economy

After several decades of sluggish growth, the Indian economy is now amongst the fastest growing economy in the world. Economic growth is currently 8-9%, second only to China.



Despite several  problems facing the Indian economy many economists point to potential strengths of the Indian economy which could enable it to continue to benefit from high levels of economic growth in the future.

  1. Demographics of India are favourable. India still has a  positive birth rate meaning that the size of the workforce will continue to grow for the foreseeable future. (unlike India) A rising workforce helps to increase saving and investment. It also enables increased productivity.
  2. There is much scope for increases in efficiency.  The infrastructure of India is so bad in places that even moderate improvements could lead to significant improvements in the productive capacity of the economy.
  3. India is well placed to benefit from globalisation and outsourcing.  A legacy of the British Empire is that India has one of the largest English speaking populations in the world. For labour intensive industries like call centres India is an obvious target for outsourcing. This is an economic development likely to continue in the future.
  4. Positive Growth forecasts A recent study from Goldman Sachs, forecast that India could growth at a sustainable rate of 8% growth until 2020.However it is worth noting that this assumed Indian would make several supply side policies such as labour market deregulation and improvements in education and training.
  5. Comparative advantage in labour intensive industries. India will also benefit from the liberalisation of free trade in recent years.
  6. Diversification of Indian economy

Indian economy

Less dependent on agriculture. Service sector offers chance for higher economic growth.

India vs China


China_india_gdpGDP per capita (in 1990 Geary-Khamis dollars) (data range 1950-2003)

There is the potential for India to close the gap with India.

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