Premature to think India will replace China as a global economic influence, says Raghuram Rajan

At a World Economic Forum press address, Former RBI governor Raghuram Rajan opined that India would take a while longer to replace China as an influence on global economic growth.

Addressing the media in Davos, Rajan said that India replacing China at the top of the pile was too premature a thought but that the situation might change going ahead, with India already the fifth largest economy, globally.

With major economists expecting a global recession in 2023, the former central bank head said any recovery in the Chinese economy would definitely boost the global growth prospects.


The ongoing war in Ukraine was also a point of concern, with its fate closely linked to the global economic situation.

"Is it all gloom and doom? Not probably...If Mr Putin decides to end the war, there would be certainly an upside," Rajan noted.

Speaking of China, Rajan said any recovery in Beijing's fates could be a positive sign for the rest of the world.

"China is working its way through pandemic and there would be a Chinese recovery this year, probably as early as March or April. Some of that would be in domestic services which may not have any impact outside. But any improvement in manufacturing may have some impact by way of softening prices outside," he said.

Additionally, the economist noted that most policy makers were looking at the labour and housing markets while making their predictions. Referring to the United States, he said a lack of housing sales have failed to bring prices down.

Asked about India, Rajan said, "The argument that India will replace China is very premature as India is much smaller economy as of now."

"But over a period of time, that may change as India is already the fifth largest economy and it can keep growing," he said.