India far from replacing China as global growth engine: HSBC

India’s impressive recent economic gains are unlikely to displace China as the world economy’s main growth engine anytime soon, according to HSBC Holdings Plc.

“The numbers don’t exactly add up,” economists Frederic Neumann and Justin Feng wrote in a report Friday. India, at the moment, “runs on too few cylinders,” while China is “simply too large to have its importance for the world economy readily eclipsed,” they said.

HSBC expects the gap between the two economies to continue to widen in the foreseeable future, expanding to $17.5 trillion by 2028, based on IMF forecasts. That is equal to the current size of the European Union’s economy. The gap between the two stood at $15 trillion last year.


The bank’s take is in stark contrast to the bullish outlook by others, such as Barclays Plc., that earlier this week said a steady 8% expansion for India will enable it to topple China as a global growth driver in the next five years.

The HSBC report also hghlights the difference in consumption and investment trends between the two Asian giants.

Even assuming zero growth in China, and a tripling of investment spending growth in India from its recent average, it would take another 18 years before India’s investment spending catches up to China’s, the economists wrote. Currently, China accounts for around 30% of world investment, while India’s share is less than 5%. Its share in global consumption also stands below 4%, compared to Beijing’s 14%.

Despite this, the economists do expect India will make a hefty contribution to world demand for commodities, consumption and capital goods, making the HSBC economists “bullish on India.”

The South Asian country will likely become a “far bigger player in global trade, possibly attaining a similar, key role in services exports as China occupies in goods supply chains today,” they said.

The International Monetary Fund forecasts India’s economy to grow at 6.3% each in 2023 and 2024, while China’s economy should grow at 5% and 4.2%, in that same period.