Peter Pontikis FCPA says ignore India at your peril.

The resurgence of Asia's economies since the dark days of the regional financial crisis of the late 1990s has been signalled by the reawakening of the Chinese economy after a long absence from the global marketplace. Though it has certainly taken the dragon's share of the limelight, what is no less significant, and likely to be even more relatively important going into the 21st century, is the emergence of that other superpopulous Asian economy: India.

India is emerging as one of the world's fastest growing economies. It has grown by an average annual rate of more than 6 per cent over the past 25 years, and more recently (according to the International Monetary Fund), growth has accelerated to levels approaching 9 per cent on an annualised basis. In a nutshell India has added more to world gross domestic product than the European zone and Japan combined in recent years.

In purchasing-power-parity terms, its economy has moved from a position of ninth on the global league tables in 1980 to be the fourth-largest single economy in the world.

The absolute levels of economic activity are aweinspiring. Nonetheless the country is, relatively speaking, underdeveloped and operates well below its theoretical potential.

With two-thirds of its population still engaged in agricultural production, its overall productivity levels remain poor, and its per capita income is still only a 10th of the US's and only half of China's.

In future there is great potential for the Indian economy to grow more rapidly as it adopts more advanced tech-nologies and industrial policies. Indeed, demographically on current trends its relatively young population will surpass China's in the next 20 to 30 years, with implications for the relative potential and size of the two economic powerhouses.

However, for the subcontinent to continue its impressive growth it will need to undertake further structural and industrial reform. This is a cultural as much as an administrative task.

Not withstanding the challenges, bilateral trade between Australia and the subcontinent has already tripled to near $9B in the past three years. The trade balance is firmly in Australia's favour, with India now the country's ninth largest export destination.

This rise in India's export significance parallels the earlier experience with the now firmly accepted Chinese economic miracle. It presents a promise for the country and region, and is something we all stand to benefit by in this second wave of economic potential – following as it does so quickly on the heels of the China phenomenon.

Although the Asian economic story into the 21st century is being firmly led by the Chinese dragon, the new Indian economy now emerges as an increasingly important partner for  regional growth.

It would be unwise to ignore this trend.

Peter Pontikis FCPA is group treasury strategist, Suncorp banking. The views expressed here represent his analysis and do not purport to represent the views of  Suncorp.

Reference: February 2008, volume 78:01, p. 18