Australia’s department of industry asks: What if India is the next China?

India has the potential to boost consumption of everything from copper to iron ore as its economy expands over the next two decades and more people flock to its cities, according to projections from the Australian government that try to fathom whether the country will emulate China.

“Like China since the start of this century, India is in the midst of a huge wave of urbanisation, the scale of which has few parallels in history,” the Department of Industry, Innovation and Science said in a quarterly report on Friday. India’s urban population may swell from about 439 million in 2016 to 642 million by 2035, or by 10 million people a year, it said.

The expansion of India’s economy is drawing rising interest from resource-rich exporters including Australia, the world’s largest shipper of iron ore, as well as mining companies such as BHP Billiton Ltd. keen for new opportunities as the pace of China’s growth cools. According to the Australian study, while India’s development is likely to be less resources-intense than China’s, there’s still significant scope for increases in commodities consumption.

“As a highly populous and rapidly developing middle-income country, India’s consumption of metals is likely to increase considerably,” the department said. Still, its relatively low investment in manufacturing and construction compared with China is likely to see its path lie between the lower-intensity seen in Latin America and the high-intensity path of the mainland, it said.

Which way?

To gauge possible outcomes over the period to 2035, the department listed demand projections for seven commodities under two scenarios, a low-intensity path based on the growth seen in Brazil, Argentina and Mexico, and a high-intensity track based on China’s experience.

By some metrics, the South Asian nation will eclipse Asia’s top economy, according to the report. India’s population is now on a par with China’s, at about 1.32 billion, it said. However unlike China, India continues to grow, and it’s projected to hit 1.6 billion people by 2035, it added.
Source: Bloomberg