investments

In less than a generation, global saving and investment will be dominated by the developing world with India?s share in global investments expected to almost double by 2030. China will also be investing more than India globally, the World Bank?s Global Development Horizons (GDH) report has said.

The report, titled ?Capital for the Future: Saving and Investment in an International World? explores patterns of investment, saving and capital flows as they are likely to evolve over the next two decades, according to a press release issued June 3, 2013.

The report analyzes how among the developing countries, China and India are expected to be the largest global investors. The two countries together will account for 38% of the global gross investment in 2030.

In fact, developing countries? share in global investment is projected to triple by 2030 to three-fifths, from one-fifth in 2000. This is expected to change the landscape of the global economy and make the world?s economies more integrated than any time in history, it added.

Kaushik Basu, the World Bank?s senior vice president and chief economist said, ?GDH is one of the finest efforts at peering into the distant future. It does this by marshaling an amazing amount of statistical information. We know from the experience of countries as diverse as South Korea, Indonesia, Brazil, Turkey and South Africa the pivotal role investment plays in driving long-term growth,? he added that, ?in less than a generation, global investment will be dominated by developing countries. And among the developing countries, China and India are expected to be the largest investors.?

According to the report, by 2039, India will reach its maximum ratio of working to non-working age population with 2.2 working person for every non-working one. But already by the mid-2020, when most of the other developing countries will experience less favorable demographic trends, India will be one of the economies with the highest ratios of working to non-working population. This, jointly with its large population and growing incomes, are the key explanations of why India will become a powerhouse in global savings and investment.

However, the report noted that, while the distribution of capital will shift toward the developing world, wealth may remain concentrated among high-income households in developing economies. If education among workers of future generations were to remain as unequal as it is today, this would perpetuate inequality of earning capacity, saving, and wealth in the future.

It said, for the case of India, without additional efforts in education, the proportion of the population with low or no education would decrease but would still be close to 60%, by 2030. Policy makers in India and in many developing countries have a central role to play in boosting private saving through policies that raise human capital, especially for the poor.

Lead economist and lead author of the report Maurizio Bussolo, said, ?GDH clearly highlights the increasing role developing countries will play in the global economy. This is undoubtedly a significant achievement. However, even if wealth will be more evenly distributed across countries, this does not mean that, within countries, everyone will equally benefit.?

The good news is that, unlike in the past, developing countries will likely have the resources needed to finance these massive future investments for infrastructure and services, including in education and health care. Strong saving rates in developing countries are expected to peak at 34% of national income in 2014 and will average 32% annually until 2030. India, by contributing 7% to global savings by 2030, will have almost doubled its current contribution in less than two decades, said the report.

GDH ? Capital for the Future paints two scenarios, based on the speed of convergence between the developing and developed worlds: the gradual scenario and the rapid one. These predict average world economic growth of 2.6% and 3% per year, respectively, during the next two decades; the developing world?s growth will average an annual rate of 4.8% in the gradual convergence scenario and 5.5% in the rapid one, it added.

By Dorcas Appiah/ghanabuisnessnews.com

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