If the Organisation for Economic Co-operation and Development (OECD) is right, India will be one of the select group of countries that will grow faster in 2011 than in the current year.
The OECD projections put real gross domestic product (GDP) growth in India at 8.3% this year and 8.5% in 2011. In contrast, Chinese growth is forecast to slow sharply from 11.1% in 2010 to 9.7% in 2011, thanks to the government’s efforts to cool the economy.
Also See GDP Forecast (Graphic)
The slowdown in Chinese growth has implications for commodity producers; hence OECD projects Brazil’s GDP growth to fall from 6.5% in 2010 to 5% in 2011. Russian GDP growth is also expected to slow in 2011, although growth in Australia is expected to be stronger, while growth in Canada is projected at around the same level as in 2010.
The chart shows the growth rates in various countries. Surprisingly, OECD predicts a higher growth rate for the euro area, which helps to pull up total OECD growth rate to 2.8% in 2011, compared with 2.7% in 2010.
The implications for asset markets are intriguing. If Indian growth will be higher in 2011 while Chinese growth slows, is there a case for investing in India rather than in China? And if OECD’s growth prediction about Europe is correct, does it not make sense to snap up beaten-down assets there?
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