It wasn’t on the 10:00 TV news, but the most important news last week came from India, where national elections resulted in a strong win for the Congress Party and the prime minister-elect Manmohan Singh. Over 417 million people voted during the six week election period.
The world’s second most populous country – and largest democracy – strongly supported a party that promotes economic liberalization, political stability and sensible foreign policy. The effects of this election will be felt across the world throughout this century.
Starting in 1991, Mr. Singh was the Finance Minister who pushed through economic reforms that enabled India’s economy to grow more rapidly and to create a more modern financial system. The Indian economy has been growing 8-9% per year since then. On the day the election results were announced last week, the major index of the Indian stock market jumped 17%.
The importance of both India and China in global economics and politics cannot be understated. Small annual increases in consumption and productivity in these countries over the next 25 years will create huge markets for goods and services that will rival the current consumption leader – the U.S.
Nominal GDP of the world’s largest economies in 2007 (millions)
| World | 54,311,608 | ||
| European Union | 16,905,620 | ||
| United States of America | 13,843,825 | ||
| Japan | 4,383,762 | ||
| Germany | 3,322,147 | ||
| People’s Republic of China (mainland only) | 3,250,827 | ||
| United Kingdom | 2,772,570 | ||
| France | 2,560,255 | ||
| Italy | 2,104,666 | ||
| Spain | 1,438,959 | ||
| Canada | 1,432,140 | ||
| Brazil | 1,313,590 | ||
| Russia | 1,289,582 | ||
| India | 1,098,945 |
* From Comparison between U.S. states and countries nominal GDP, IMF data on Wikipedia.
Although the GDP of India is currently much smaller than that of the U.S., China and other countries, the enormous population and an increased growth rate will create a global powerhouse that will rival the top economies. The election of the growth-oriented Congress Party, rather than religious or communist coalitions, means that India is more likely to ascend to a position of global economic power.
Are you ready for a world where India and China have larger economies than the U.S.? It will likely happen in the next 50 years.