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Ever since I started blogging in 2009, I’ve been predicting that China would become the world’s largest economy, and much faster than most people expected. If you’ve been reading the news, you know that it has already happened. But I also made a more outlandish claim, that India’s economy would soon be as large as Japan’s (a country with exactly 1/10th India’s population), and that in 100 years India would have the world’s largest economy. Later I moved that auspicious date up to 2081.

Unfortunately India hit a wall right after I made those predictions, and its growth rate slowed. The reform process stalled. The Sumner jinx. So am I scaling back my forecasts? Not at all. The Economist has come out with its GDP forecasts for 2o15, and it says India’s economy will be almost 60% larger than Japan’s economy, at nearly $8 trillion (PPP). My new forecast is that India will surpass the US by the early 2030s, and become #2. To give you a sense of just how outrageous that forecast is, consider that a few years ago Lester Thurow was forecasting that the US economy would remain larger than China’s for the next 100 years! Many other forecasters expected China to surpass us eventually, but almost none as soon as I did. India? No one even talks about it.

Here are the Economist (PPP) forecasts for 2015:

China $19,584.0 billion (over $20 trillion if you include HK and Macao, and why the hell shouldn’t you?)

USA $18,365.5 b.

India $7,899.4 b.

Japan $4,952.8 b.

Germany $3,844.7 b.

India is forecast to grow at 6.5% next year. It seems reasonable that India will grow about 4% to 5% faster than the US for the next few decades. By the early to mid-2030s America will be number three. And that’s something to give thanks for, as it is the only way that billions of Asians can move out of poverty.

BTW, I participated in a recent Cato symposium of economic growth. And later this afternoon I’ll do a post on growth over at Econlog.

PS. If any commenter wishes to complain that it’s per capita GDP that matters, then please move to Liechtenstein or Qatar and leave the rest of us alone. If the US and India both spend 2% of GDP on the military in 2034, we’ll have roughly equal defense budgets.

PPS. Some of this is due to the IMF and World Bank dramatically redoing their PPP adjustments. Back in 2009 I complained that the PPP adjustments for China were far to small, but there was no objective “truth” of the matter. On the other hand, Rorty once claimed that when people say something like; “Although my peers believe X is true, I think Y is actually true” it’s an implied prediction that eventually people will come to believe that Y is true. As far as PPP adjustments for China (and many other Asian nations), that day has arrived.

PPPS. Unfortunately there still is no objective truth to the question of whether the US or China is the world’s 3rd largest country, geographically speaking. That question remains shrouded in the Rortian mists of disputed borders.

PPPPS. The Economist contains other interesting tidbits—next year Indonesia surpasses France and Great Britain in total GDP (PPP). The distinction between middle and high income continues to blur—where do you put countries like Malaysia ($26,320 per capita) or Chile ($24,310 per capita?) Portugal and Greece are only around $27,000.

PPPPPS Singapore at $83,340/person? Even I don’t believe that. What happened to common sense? Who makes these estimates?

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This entry was posted on November 27th, 2014 and is filed under China. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or Trackback from your own site.



