India set to become World's fastest growing economy

The 'Tiger' is set to overtake the 'Dragon' in the next 3-5 years. If the recent Morgan Stanley report on Global growth is to be believed, India is set to overtake China to become the fastest growing economy in the world by 2013. while India's GDP growth is expected to climb steadily towards 9-9.5% in the period 2012-15, China's growth is expected to cool down to 8% levels by then.

As the death rate and the birth rate are expected to fall in India, it can hope to get the largest addition to the working population during this period, leading to a quantum jump in productive capacity. this is likely to push up the net savings rate which is currently around 35% of GDP. The FDI flows to India in terms of percentage of GDP (3%) has already overtaken that of China in 2009.

However, this scenario can be created only if the government is able to pump in the necessary resources to boost infrastructure development. Another issue would be the ability of the Govt. in handling the internal security issues of naxalism and separatism. The instability on the political front can jeopardise the growth projections, as it leads to critical loss of man days, leading to a dent in production capacities. On the other hand, the Govt. will have to improve the productivity of the agricultural sector to be able to feed its burgeoning work force, and control the run away food prices, which could become the nemesis of the govt.

If indeed India is able to catapult itself at the top of GDP tables, investors in equity markets are in for some bonanza. The period from 2012 onwards should, in all probability, be the golden period for Indian stock markets. Investors are advised to start investing selectively, and wait for any dips in the markets to put in their money into Indian stock markets, to ride the next bull run. But remember, there could be a temporary dip in the markets before the markets cross their previous 2007 highs, be prepared for that eventuality. But the long term bullishness in the markets is surely evident, for all investors to cherish.