The 10 largest economies by 2050 (in trillion 2010 PPP dollars) will be very different from what

they are now. In view of its continuing robust growth, India is expected to be the world's largest
economy by 2050, surpassing China and the United States, a Citi report said. "China should
overtake the US to become the largest economy in the world by 2020, then be overtaken by
India by 2050," financial services group Citi said the report.
The estimates are based on Purchasing Power Parity (PPP), an economic growth indicator that
takes into account the purchasing power of each country's currency, instead of the prevailing
exchange rate conversion. Indian economy is expected to be nearly USD85.97 trillion on PPP
basis by 2050 from USD 3.92 trillion in 2010, Citi said.
Going by the report, India would surpass the US -- currently the world's largest economy -- to
become the second largest by 2040. The report noted that "We expect India to overtake Japan
to become the third largest economy in the world by 2015,".
In terms of PPP, Indian economy -- valued at USD 3.78 trillion -- was at the fourth place in 2009.
The country was behind the US, China and Japan, according to the World Bank.
Citi pointed out that North America and Western Europe's share of world's real GDP (in terms
of dollars calculated on PPP basis) is expected to fall from 41 per cent in 2010 to just 18 per
cent in 2050. During the same period, developing Asia's share is predicted to rise from 27 per
cent to 49 per cent in 2050. Citi emphasized that a number of major changes within a relative
short time are required for India to meet future challenges.

Noting that India's infrastructure has to be improved, Citi said the country needs to relax its
"hostile attitude towards FDI", if it is to reap the benefits of rapid cross-border technology
transfer that China has benefited from so greatly. "...a further round of serious deregulation of
the domestic economy and further trade liberalisation are required," it noted.

The report said India's population of working age is expected to grow by 40.7 per cent between
2010 and 2050. India has successfully raised its aggregate savings rate to levels that would
allow sustained high levels of domestic capital formation (the domestic saving rate averaged
34.4 per cent over 2006-2009 and the gross domestic investment rate 32.4 per cent), the report
added.
Many potential drivers have been put forward. But at the highest level of aggregation, the
taxonomy of potential growth drivers only has three categories: (1) initial conditions and the
external environment, (2) institutions and (3) policies. Each of these three categories does,
however, have a number of sub-categories.

The momentous shifts in economic weight and power are also evident in rankings of the largest
economies by size of real GDP in 2010 PPP dollars.

Citi expects India to overtake Japan to become the third largest economy in the world by 2015,
but otherwise forecast little change in the order of the ten largest economies over the next five
years.

By 2020, China should have just overtaken the US to become the largest economy in the world,
while Italy would have dropped out of the top ten, to be followed by France by 2030, the UK by
2040, and Germany by 2050.

By 2050, the make-up of the ten largest economies in the world should bear little resemblance
to the one in 2010.

Bangladesh, China, Egypt, India, Indonesia, Iraq, Mongolia, Nigeria, Philippines, Sri Lanka and
Vietnam have the most promising (per capita) growth prospects, according to Citi. And these
are Citi's Global Growth Generator or 3G countries.

Citi expects India's real per capita GDP to grow at 6.4% p.a. over the 40-year period between
2010 and 2050 (7.2% p.a. over the next 10 years and at rates of 7.7% p.a. between 2020 and
2030 and 5.2% p.a. between 2030 and 2050). As a result, India is expected to become the
largest economy in the world by 2050, overtaking China and the US in the process.

India starts way below the frontier: it ranks 54th in real per capita GDP, at USD 3,298 in 2010. It
truly is an Emerging Market as regards the sectoral composition of its production and labour
force, which are overwhelmingly rural. Its demographic evolution is at least 35 years behind
that of China with a high (but falling) birth rate and a large and growing population of young
workers: India's population of working age is expected to grow by 40.7 per cent between 2010
and 2050.
India's assets are many: It has successfully raised its aggregate savings rate to levels that would
allow sustained high levels of domestic capital formation (the domestic saving rate averaged
34.4 per cent over 2006-2009 and the gross domestic investment rate 32.4 per cent).

Its education system, while not without weaknesses, produces a large pool of cheap,
internationally competitive, English-speaking graduates, allowing India to build up a
comparative advantage in certain sectors, such as IT or business processes.

This 'demographic dividend' can, of course, become an economic curse if the young are not
educated and trained properly and if the domestic capital formation rate is not high enough to
create an adequate supply of productive jobs.

For India to meet that challenge, a number of major changes will have to occur in a relatively
short period of time. First, India's infrastructure has to be improved across the board. Second,
India has to move from a position of educating a limited number of youngsters very well but
not the majority (especially females in rural areas and the lower castes almost everywhere) to
one of educating all its youth properly. Third, India needs to relax its hostile attitude towards
FDI, if it is to reap the benefits of rapid cross-border technology transfer that China has
benefited from so greatly. Finally, a further round of serious deregulation of the domestic
economy and further trade liberalisation are required. Pricing water, energy and other
resources at full marginal social long-run cost, at least for all producers especially, in the case of
water, those in the agricultural sector - or equivalent measures to ration the use of these
essential scarce resources will be necessary to avoid an environmental block on economic
growth.

Given these changes, India's growth rate during the next 20 or 30 years could be as high as
those of China this past decade, and these prospects are reflected in India's 3G score of 0.71.