Monday, February 7 2005 12:38 Hrs (IST) - World Time -

London: India's economic growth could actually exceed that of China by 2015 and the country has the potential to deliver the fastest growth over the next 50 years, Goldman Sachs, the investment bank, has estimated.

The Indian economy expanded by 8.2 per cent in 2004, only slightly behind China's growth of 9.5 per cent and nearly three times Britain's rate of 2.8 percent, The Sunday Times reported yesterday (Feb 06, 2005), quoting Goldman Sachs.

"Growth in India could actually exceed that in China by 2015."

Dominic Wilson at Goldman Sachs said, "India has the potential to deliver the fastest growth over the next 50 years with an average rate of more than 5 per cent a year for the entire period. China's growth is projected to drop below 5 per cent around 2020."

The bank predicts that India will overtake Britain in 2022 and Japan in 2032 to become the third-biggest economy in the world after China and America.

Strong economic growth is expected to translate into robust stock-market returns as company profits increase and foreign investment floods in, the report said.

The Indian stock market could deliver an average return of 10 per cent a year over the next 50 years, according to research by Standard Life Investments.

Richard Batty, global investment strategist at Standard Life, said, "The balance of economic power in the world is set to shift dramatically over the next 50 years, presenting a great opportunity for investors, particularly in India and China."

Andrew Gillan, one of the managers of Aberdeen's Far East Emerging Economies fund, said, "It can be difficult to find decent investments in China because the State still owns big stakes in many enterprises and there is often a lack of transparency.

"India, by contrast, has some exceptionally well-run companies. Indian firms provide investors with a higher return on equity than any other emerging market in the Asian region."

India's growth is being driven by its population of more than one billion people, the report said. They offer a huge pool of educated but cheap labour for international companies - the average wage in India is about 300 Pounds a year compared with more than 20,000 Pounds in Britain.

The report said that the Indian information technology sector has been one of the main beneficiaries of outsourcing.

More than 75 per cent of IT services outside America are now sourced from India, according to IBM. Indian IT companies such as Tata Consultancy Services and Infosys now count firms such as BT and British Airways among their clients, and the sector is growing by about 30 per cent a year.

But there is more to India than outsourcing.

Allan Conway of Schroders, a fund manager, said, "Emerging markets such as India have to rely on international trade in the initial stages of their development, but as employment grows and people get wealthier, they become a rich source of domestic demand that can sustain the economy."

India already has a middle class of 200 million people and this is set to get even bigger - and richer. Average income have already soared by 60 per cent over the past decade and they are expected to grow further, from $ 559 at present to $ 1,149 in ten years time and $ 17,366 by 2050 according to Goldman Sachs.