A Study On India 's Economic Growth Potential

Since the late 20 th century, countries from Asia-pacific region had gradually become the world’s new growth engine. Countries like China and India continue to create growth miracles. By the end of the 20 th century, as the world’s two largest developing countries, China and India become the world’s fastest growing economy. In 2003, Goldman Sachs firstly named Brazil, Russia, India and China as the ”BRIC”, and predicted that around 2050, both China and India will overtake United State as the world’s top two economies. In 2010, India enjoyed a higher GDP growth rate than China for the first time. In 2012, according to the data released by international monetary fund of 2011, India’s annual GDP(PPP) had reached $4.46 trillion, slightly more than Japan’s $4.44 trillion, and it became the world’s third-biggest economy. However, since the first quarter of 2012, India’s economic growth slowed dramatically, the BRIC’s color has faded.Compared with other developing countries, India’s manufacturing industry has been growing at a very low rate. Its tertiary-industry, on the contrary, is developing very fast. One of the purposes of this paper is to make an assessment of India’s economic growth since 1947. Another goal is to predict to what extend that India is able to continue its economy growth. That’s to evaluate India’s growth potential. Since Rao’s reform had greatly changed the economic structural in India, this paper will debate respectively the economic growths before and after Rao’s reform. To make a measurement of India’s growth potential under the condition that no big changes happened in short term period, this paper then estimated the Potential outputs of India. It’s obviously more meaningful for us to understand India’s growth potential in long terms if we could able to make a prediction of the GDP growth rate of India. So in this paper, the growth rate of GDP is forecasted by applying two different econometric models. Moreover, for a developing country like India, its economic development is inevitably influenced by non-economic factors. Therefore, the final part of this paper mainly focused on the internal and external environment of India. After analyzing India’s internal politics, culture, and security problems, this paper will further analyze India’s relationship with its several closely related countries and regions under the context of globalization. Through the analysis, it can be expected that in the next 10 years, India will reach an average growth rate of 8% to 9%, which is larger than the growth rate now.