A passage to India
July 27th, 2010
This week the UK Prime Minister leads a large delegation of Ministers, officials and business people to India. It is a pilgrimage to recognise the growing importance of India as a world economy, trading partner and emerging power.
We have liked India as a place to invest. It performed well across the Credit Crunch, and continues to be one of the fastest growing economies in the world. Today it has some overheating problems. The monetary authorities are raising interest rates to control price increases and stave off a worse level of inflation
The Indian economy at $1.2 trillion a year of output is still smaller than the UK with $2.2 trillion. However, when you look at it on a purchasing power parity basis India now sports a $3.5 trillion economy to the UK’s $2.2 trillion.
India dwarves the UK in population. With 1165 million people, she is 18 times larger than the UK with 63 million people. Indian average incomes remain low, at $1000 a head compared to the UK’s $33000.
We expect India to continue to grow more rapidly than the world economy as a whole. As she applies modern technology to her activities, so output and incomes will rise and many more people can come off the land into more productive uses. There will need to be some temporary slowing of the economy to fight inflation.
The UK is recognising what we have long realised – India will be a star of the future. There is already a substantial and prosperous middle class in centres like Mumbai.
