India has highest medium term growth potential among among large emerging markets: Fitch

India has highest medium-term growth potential among large emerging markets, according to global ratings firm Fitch, as their new approach to growth estimates places high importance to demographic factors and investment rates and this is of advantage to India.

“New estimates of supply-side potential GDP growth over the next five years highlight the importance of demographic factors and investment rates and place India at the top of the list among the ten largest emerging markets (EMs) covered in Fitch Ratings' Global Economic Outlook (GEO) forecasts” Fitch said in a report.

India's projected potential growth is 6.7% per annum. China and Indonesia jointly rank second-highest, both with projected potential growth of 5.5% per annum The estimate for China represents a significant slowdown from recent historical average growth and reflects both a deteriorating demographic outlook and a slowdown in the rate of capital accumulation as the investment rate has declined. Broader measures of productivity growth in China have also slowed since the late 2000's.


India along with Indonesia, Mexico, Turkey and Brazil are set to see continued robust growth in the working-age population in the next five years, bolstering GDP growth potential, Fitch said. In contrast, in Russia, Poland, China and Korea headwinds from deteriorating demographics will sharpen and weigh on growth.

India and, to a lesser extent, Turkey have also seen an impressive rate of capital accumulation per worker, but in the latter's case this has been funded externally, with associated downside risks. In contrast, in Brazil, Mexico and South Africa, the growth in capital per worker has historically been much more muted. This has weighed on the growth rate of living standards.