- Rupak De Chowdhuri/Reuters
Here’s some good economic news: India is doing everything right and setting itself up to be the next economic powerhouse.
Here’s some better news: it could happen in countries around the world.
Or at least that’s the way it appears to Jeff Kleintop, chief investment strategist at Charles Schwab. In his opinion, India is the bright spot of the economic world and it’s only looking better.
“India is booming and all of the growth that the country is producing is from services,” Kleintop told Business Insider. “It is really the bright spot, the positive in the global economy.”
The reason is simple, according to Kleintop, the country has focused most of its growth on the services sector. Based on World Bank estimates of value added to GDP, 52.1% of value added to Indian GDP comes from the services sector while industry (including manufacturing, mining, etc.) only makes up 30.1%. In contrast, China’s split is 48% Services to 42.7% industry.
Additionally, said Kleintop, the country has not been impacted by the recent downturn in commodities and manufacturing, as other emerging nations have, due to its closed nature. Again according to the World Bank, India derives 23.6% of its GDP from exports, similar to China’s 22.6% and much lower than other emerging economies.
All of these factors are in addition to booming population growth and relatively pro-business reforms that have set the country up for success, according to Kleintop.
Even better, India’s success is replicable.
“There’s an India in the US, there’s an India in Europe, we have them across the world we just have harness them,” he told us.
Kleintop said investing in and emphasizing the growth of these industries are an important way to help the economies of the rest of the nations thrive.
In fact, based on value added to GDP by the services sector, both the US and many European countries create more of their wealth from the services sector than India. According to Kleintop, this is also a matter of perception.
“Somewhere around 80% of the data we get every month is from manufacturing and industrials,” he said. “We spend so much time focused on that when most of the strength and economy in the US comes is services.”
By both focusing efforts on continuing to grow services, and possibly by paying it more attention, Kleintop believes that the US can continue the good story of India’s success, albeit more slowly.