Economic Growith - India and China

As per the latest report Indian GDP has grown at the rate of 9% in 2005-06 and expected to grow at 9.2% for 2006-07. All the analyst keep wondering if this is a one of case of high growth or have India entered a high growth phase. They break up the growth sector wise, look at various economic parameter like investment, money supply, inflation and even government deficit. However, I have not seen any analyst link this growth rate to export performance and I find this very surprising!

For the last few years the export growth and growth of IT & ITES has been steadily around 30%. The combined contribution of these to the overall GDP has been increasing from just above 10% few years back to nearly 20% now. If you breakup the economy into export and non-export, then you will see a surprising result. The growth rate of the rest of the economy has remained at around 5%. Because of the significantly faster growth in export, the relative share of export is increasing. As a result, the overall GDP growth has been accelerating without any change in the growth rate of export or rest of economy!

My calculation shows that GDP growth for 2006-07 is likely to be around 9.5%! Also, by 2009 we would have reached a double digit growth. I suspect that India will overtake China in GDP growth rate in 2009 for the following reasons.

1. China's growth is also fueled by export, but its share of export to total GDP is close to 50%
2. China will find it difficult to sustain the export growth rate
3. The Olympics to be held in China in 2008 will a contributing factor to the growth
4. So, in 2009 that factor will not be there
5. On the other hand India is hosting commonwealth games in 2010
6. The investment in infrastructure would have reached its peak in 2009