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India, China set for big boom: UK economist

Shyam Bhatia in London | November 11, 2003 16:36 IST

A leading British economist says that India and China are two countries to watch as their economies take off, invoking memories of the early 19th century when both countries accounted for 45 per cent of global GDP.

Dr Gerard Lyons, chief economist at the Britain's Standard Chartered Bank, says that as late as 1866 Britain was producing only the same amount of steel from its blast furnaces as China had produced 800 years earlier.

In comments timed to highlight the 150th anniversary of Standard Chartered Bank, Lyons says it is no coincidence that the bank opened its first two branches in Shanghai and Kolkata because at the time both China and India represented the world's two big economies.

"Their huge populations gave them both a great advantage, just as they do now," he said.

"Both countries were prosperous and peaceful and benefited from effective governments, good communications and increased trade -- features from which they are benefiting once more.

"Unfortunately for India and China, both countries missed out on industrial advances and were overtaken. "Now its catch-up time. We are witnessing the rebirth of these two great economies," he said.

"Able to attract investment, they are growing strongly and there is more to come. Western firms are moving factories to China and call centres to India. The three words read most around the world at the moment are 'Made In China'," said Lyons.

Lyons, who recently returned from a business trip to India, told that colonial policies may also have been a factor in blocking India's economy in the early 19th century.

"I've seen colonialism raised as an issue during the United Kingdom's industrial revolution when India was prevented from exporting high quality textiles. That may have been an issue at an earlier stage."

Turning to the future Lyons added, "I predict a stronger and more open economy in India, basically stronger growth, more volatile growth and greater diversification."

He added that Western investors will soon be engaged in debates about whether India or China is the better country for investment, explaining that the right choice could result in huge economic returns.

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