India fastest growing country in the coming decade: Harvard
India tops the list as the fastest growing country for the coming decade, at 7.9 per cent annually, in the economic complexity growth projections, say the Harvard’s Center for International Development (CID). India has made inroads in diversifying its export base and its productive capabilities far exceed expectations for the current income level.
Countries that have diversified their economies into more complex sectors, like India and Vietnam, are those that will grow the fastest in the coming decade, say the researchers at CID. India and Uganda top the list of the fastest growing economies to 2026, predicted at 7.9 and 7.5 per cent annually, respectively.
“Southeast Asia continues to dominate the global growth landscape, driven by the diversification of economies into complex manufacturing, but the leading countries have shifted within the region, with the Philippines, Vietnam, Indonesia, and Thailand poised to lead growth in the coming decade,” said Ricardo Hausmann, director of CID, professor at the Harvard Kennedy School (HKS), and the leading researcher of The Atlas of Economic Complexity.
The researchers place the diversity of tacit productive knowledge—or knowhow—that a society has at the heart of the economic growth story. The research dispels conventional policy wisdom focused on innovation policy, as the majority of global growth is driven by local adaptation of existing technologies, rather than true innovation. The fastest growing countries are not producing new products that do not exist globally; rather, they are introducing existing products into new local economies.
The next decade should see a continued period of convergence in global incomes, as poor countries catch-up to the rich, though the rate of convergence appears to be slowing. The countries at the top of the growth list are also some of the world’s poorest, highlighting the ease of growing from a lower initial income base. This helps explain why India and Pakistan (7th) are predicted to grow faster than China (25th), which has a higher ranking of its economic complexity, but has already realised many of the income gains from a diverse, complex economy.
The researchers further point to many low-income countries that will experience low growth rates. “Economic diversification and complexity, in the range and sophistication of products a country makes, are key determinants of long-term growth. Many low-income countries, including Bangladesh, Venezuela, and Angola have failed to diversify their knowhow and face low growth prospects. Others like India, Turkey, and the Philippines have successfully added productive capabilities to enter new sectors and will drive growth over the coming decade,” said Sebastian Bustos, a lead CID researcher in trade and economic complexity methods.
The researchers also find India ranks the best on the criteria termed the Complexity Opportunity Index (COI), which measures how easy it is to redeploy existing knowhow to enter new complex products. India’s existing capabilities have not only diversified its exports, but also allow for easy redeployment into related products that depend on those capabilities, making further diversification relatively easy.
The top ranking in COI means India has many unrealised opportunities to diversify into related, high-value sectors to continue to drive productivity growth and job creation. Up to now, that potential remains unrealised, however, as India’s complexity has not changed over the past decade. The rapid growth that is predicted is effectively capitalising on previous gains in complexity. Ensuring the long-run potential of growth will rely on realising diversification into related products. (KD)
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