Economy: Not only China but also India will overtake US

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New Delhi: The economy of China will be bigger than that of the United States by the next year, and India will overtake the US by 2030, according to a Standard Chartered Bank report. The bank surveyed countries’ purchasing power parity (PPP) exchange rates and nominal GDP toarrive at this conclusion.

In both the Asian countries, it’s the growing middle class that will expand the economies. “The global middle class is at a tipping point,” Standard Chartered researcher Madhur Jha said in the report. “By 2020, a majority of the world population will be classified as middle class. Asia will lead the increase in middle-class populations even as middle classes stagnate in the West.”

India will overtake the US economy by 2030 because of rapid urbanisation, too, the report said. “India will likely be the main mover, with its trend growth accelerating to 7.8% by the 2020s partly due to ongoing reforms, including the introduction of a national goods and services tax (GST) and the Indian Bankruptcy Code,” Standard Chartered said.

The much talked about demographic dividend will start to pay in the two most populous countries in the world. “Our long-term growth forecasts are underpinned by one key principle: countries’ share of world GDP should eventually converge with their share of the world’s population, driven by the convergence of per-capita GDP between advanced and emerging economies,” thereport states.

This does not mean that the economies of Europe and the US will slump. They will grow, too, but at a slower rate. The rich-poor divide will increase in American society to alarming levels.

According to a study by Visual Capitalist, Canada, France and the UK will lose their positions in the top 10 global economies.

economy in 2030
Illustration by Visual Capitalist

However, if the calculations are done on the basis of market exchange rates instead of PPP, the outcome will be quite different. “By [using simple market exchange rates] the U.S. is still today the world’s biggest economy, with a $ 7 trillion lead over China,” wrote Ben Chu for The Independent.

“Using market exchange rates rather than PPP would also most likely change the 2030 picture. The International Monetary Fund does not forecast beyond 2023, but at this date the Fund thinks the US will still be the world’s largest economy at market exchange rates and that the UK will still have a comfortable lead over the likes of Indonesia, Turkey, Brazil, Russia and the rest with little evidence of catch-up,” Chu said.

Chu continued: “The reason why China is larger than the US at PPP exchange rates is because it has a population four times larger. If one measures GDP at PPP per person a very different picture emerges, with China on $ 18,000 and the US on $ 63,000.”