World Bank says India and China set to become largest investors

World Bank in its World Bank’s Global Development Horizons (GDH) report, predicted that seventeen years from now half the global stock of capital, amounting to $158 trillion, will reside in the developing countries, compared to less than one third today with countries in East Asia and Latin America accounting for the largest shares of this stock.

The global investment share of developing countries' will get tripled from 1/5th in 2000 to 3/5th in 2030 said the report named, ‘Capital for the Future: Saving and Investment in an Interdependent World’.

With the world population set to rise from 7 billion in 2010 to 8.5 billion in 2030 being the key factor and other factors like rapid aging in developed nations and demographic changes will influence these structural shifts, says the report.

Indian economist and the World Bank’s Senior Vice President and Chief Economist Kaushik Basu 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”.

He also said that, “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. In less than a generation, global investment will be dominated by the developing countries. And among the developing countries, China and India are expected to be the largest investors, with the two countries together accounting for 38 percent of the global gross investment in 2030. All this will change the landscape of the global economy, and GDH analyzes how.”

The developing countries are likely having the resources for massive future investments for infrastructure and services, including education and health care. The saving capability for the developing nations is expected to peak to high percentages and other issues like productivity catch-up, increasing integration into global markets, and sound macroeconomic policies are helping speed growth and create massive investment opportunities, which, in turn, are goading a shift in global economic weight to developing countries.

By 2030, for every dollar invested in the world, 60 cents will flow into developing countries, a dramatic change from 20 cents to the dollar in 2000. China will make up 30 per cent of all investment activity, while the United States will have 11 per cent and India, 7 per cent.

According to these numbers it is presumed that the world will grow on average 2.6 per cent to 3 per cent a year in the next two decades, while emerging economies will grow 4.8 to 5.6 per cent a year.

The south-south capital flows, flows from one developing nation to another, will have a greater impact on the rest of the world and reduces the influence of US and euro area policies.

The World Bank said that a richer world in 2030 will also have a greater demand for services over manufacturing, meaning countries will face pressure to reduce protectionist barriers to trade in services.

The lead report author Maurizio Bussolo  said, " As the global saving may not be equally distributed it can be a cause for concern. Also in most developing nations, the top segment of the population saves three to four times more than the poorest. So in terms of our projections, we see the increased importance of developing countries. But behind that, there is a lot of work to do, and very little time."