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India to Lead Global Recovery by 2015, Says Forecaster

India West, News Report, Sunita Sohrabji Posted: Jun 19, 2009

SAN FRANCISCO, Calif. While Chinas consumer spending will lead a worldwide economic recovery in the near term, India will be poised to take over the reins by 2015, said a leading forecaster at a workshop here June 9 on the global financial crisis.

India is not there yet as a growth driver for Asia, but it will happen within the next decade, Robert Ward, director of the global forecasting team of the Economist Intelligence Unit, told India-West. The countrys long-term growth potential is greater than that of China, and its political system is much more flexible, he added.

Ward was the keynote speaker at the workshop held at the Westin St. Francis Hotel and sponsored by the Asia Society, the Economist Intelligence Unit and several local organizations.

India will continue along at a growth rate of 6-7 percent over the next decade, and once it achieves this momentum, it will outpace China in the long term, Ward told this reporter after his keynote address.

China will become less capable of growth as its population matures, whereas India has a majority population under the age of 34, he said.

Several factors may hold India back, cautioned Ward, noting his recent experience of trying to get out of Mumbais airport and into the city, which took almost two hours. He also noted Tata Motors recent struggle with farmers and local politicians in West Bengal while trying to establish a plant for its new Nano car there.

The plant could have been enormously beneficial to the local community, said Ward, adding that while Indias government offered greater flexibility than its Chinese counterpart, issues such as the Nano plant dispute could make investors hesitant to invest in the country.

The panelists at the workshop all opined that the global economic recovery would take several years, and that growth would be slow.

Sanjiv Sanghvi, president and CEO of Wells Fargo HSBC Trade Bank, in the first panel of the workshop, discussed the implications of the global financial crisis for the U.S. and Asia.

Despite the current euphoria, there is a long road to recovery, said Sanghvi, agreeing with Ward that the global recovery would be led by Asia, not the U.S.

He placed much of the blame on the U.S. financial crisis on the process of repackaging property loans to form a mortgage pool.

Now, no one knows what these loans are, which means we ultimately dont know what the bottom line is, said Sanghvi, a financial services industry veteran.

Kausik Rajgopal, a partner in McKinsey and Companys San Francisco office, likened Americas response to its financial crisis to Swiss psychiatrist Elisabeth Kubler-Rosss five stages of grief.

The first stage anger came after AIG Insurance awarded bonuses for its senior staff after accepting $170 billion from a government bailout. The bargaining stage followed a government-mandated stress test for banks in early February.

The U.S. consumer is currently in Kubler-Rosss third stage depression said Rajgopal. Were ready to be lied to, he added.

The American consumer has performed a tremendous service over the past 30 years, said Rajgopal, noting that one-third of all spending came from the U.S. Unfortunately, much of that was based on borrowed funds.

The U.S. economy is now undergoing a huge de-leveraging the reducing of debt - as everyone, including lending companies themselves, are become less credit-worthy, said Rajgopal, adding that U.S. consumers now have a more fragile trust of financial institutions and are more risk averse.

Critiquing the Obama administrations fiscal stimulus plan, Rajgopal said that fiscal policy has to strike a balance between helping and overdoing it.

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