India to witness 9-9.5 per cent growth rate over 2013-15: Morgan Stanley

New Delhi: Witnessing continuing structural reforms, globalisation and a sterling demographic dividend, India is bound to increase its growth rate to 9-9.5 per cent over 2013-15, even as China will moderate down to 9 per cent by 2012 and to 8 per cent by 2015, as per a new report by Morgan Stanley, authored by Chetan Ahya (managing director for Asia and India economist) and Tanvee Gupta.

India has one of the lowest median ages among the major economies and with the large working age population, India is bound to reap twin effects. One, it will allow people to save a large proportion of their income, thereby increasing the country’s rate of savings and two, it will boost the number of people who work and contribute to growth. With structural reforms the additional workers will find work and the sheer rise in the number of workers would increase gross domestic product (GDP) growth. Also with reforms, productivity per worker would increase raising the GDP even faster.

Moreover, globalisation gives additional job opportunities, extra capital to augment rising domestic savings and additional know-how. Basing its analysis on the above cited factors, the report expects India to become the world's fastest-growing economy. Kaushik Basu, Chief Economic Advisor to the Government has also been forecasting similar formats of development.

Underlying the forecast is the assumption that India will significantly increase its expenditure on infrastructure and in plant and machinery. Infrastructure expenditure has gone up from 5.4 per cent of GDP in 2005 to 7.5 per cent in 2009 and is poised to go up to 8 per cent of GDP in 2010. Over 2012-17, the forecast is that India's infrastructure spend would be US$ 1 trillion as compared with US$ 530 million over the previous five-year period.

Another assumption is on the quantity and quality of the young people coming into the workforce. While India will be the largest contributor to the world's workforce — all of 136 million people — over the next 10 years (fully a quarter of the entire world's additional workforce) in comparison China will add just 23 million.

The report also assumes that there would be an increase in the number of young people completing their education, making India the largest contributor to the pool of tertiary educated workforce in the world.

All these changes would be supported and complemented by further reform by the government in fiscal consolidation, opening up of retail to foreign direct investment, public sector reform and divestment, and improvement in governance that would reduce transaction costs.