TOI Article

India to reclaim Mughal-age economic aura

India and China are set to become the world's leading economic and political powers in about 50 years reclaiming the glory of the year 1700 when Mughal India and Qing China each accounted for about one-fourth of world GDP, a leading German bank said on Tuesday.

According to data compiled by economic historian Angus Maddison, as recently as 1700, Qing China and Mughal India each represented a little less than 25 per cent of world GDP, but their respective shares dropped to less than 5 per cent by 1950, the Deutsche Bank said in a report.

However, China and India are poised to reclaim their places as the world's largest economies over the next half century, Deutsche Bank Research said in the report.

Noting that the four BRIC nations Brazil, Russia, India and China are characterized by high economic growth rates, large populations and expanding middle classes, the report said China and India would "re-emerge as major economic and political powers over the next fifty years or so and China is projected to replace the United States as the world's largest economy by 2040."

In his book The World Economy: A Millennial Perspective, economic historian Angus Maddison has noted that during the years 0 to 1000, India figured as the world's pre-eminent economic power, closely followed by China. During 1500-1600 years also, India was only next to China in terms of world GDP share and remained among the top till as late as 17th century.

India was the world's largest economy with a 32.9 per cent share of the worldwide GDP in the first century and 28.9 per cent in the 11th century.

In 1700, when most part of the country was ruled by Mughals, India had a 24.4 per cent world GDP share, higher than entire Europe's 23.3 per cent. However, thereafter, it started falling and slipped below four per cent by 1952 and further to its lowest 3.1 per cent in 1973.

During 1700, when India was mostly ruled by the Mughals, China was being ruled by the Qing dynasty.

According to Deutsche Bank, the BRIC nations have different economic strategies. China relies on large domestic savings and high investment rates, a competitive exchange rate and a manufacturing-based export-oriented strategy, while the other three countries follow different models.

Further, it noted that while India's growth is heavily concentrated in services (and lagging in manufacturing), Brazil pursues a diversified growth strategy focusing on services, manufacturing and commodities simultaneously.

"These differences in economic strategy, especially as pertains to trade openness, stability of export revenues and savings generation capacity, are of relevance to the BRIC countries emerging role as international investors," the report said.

Moreover, China would be a major net capital exporter over the next decade mainly due to its large domestic savings and export-oriented development strategy.

Deutsche Bank pointed out those government-controlled external assets would increase in all BRIC countries and added, "on account of its large current account surpluses and large FDI inflows, China will also dwarf the other BRICs in terms of gross external asset accumulation, especially if the Chinese authorities continue to liberalize inward investment."

Nonetheless, all the four countries would emerge as important international investors, it added.