Interesting Global marathon race for economic & markets power between 3 runners - US , China & India – Who wins? Long term economic & market returns outlook
Hey friends, my passion for equity market watching and long-term equity investing, made me an avid watcher of leading economies also (market watcher turning into an interested economist 😊) as both are linked in long term . For example, I recently was the lone wolf crying that India will do about 8% growth in FY26(since beginning of this year), while big institutions like world bank , IMF & own RBI with all the data , resources and models incorrectly predicted that Indian economy is slowing down at 6.2 to 6.5% for FY26 , with potential slowdown in corporate earnings , leading to FII exit and markets correcting badly . I stood correct when the actual numbers of Q1 of 2026 came at 7.8% .
While , Over short term , one might not see strong co relation between economy & markets cause of short sighted and overreactive market participants😊, both show a good co-relation in long term. Benjamin Graham...guru of Warren Buffet used to say that " markets are voting machine in short term & weighing machine in long term" 😁. In long run , GDP growth correlates with corporate earnings growth which in turn corelates with market/ index returns . For example in India , nominal GDP growth ( real GDP plus inflation) has been about 12 % in last 25 years , leading to about 15% earnings growth for Nifty 50 companies which is turn have generated 14-15 % returns ( including dividends) for Nifty 50 index.
Picture a global marathon with three very different runners.
The United States is the seasoned veteran — tested, resilient, and still holding pace even after decades of leadership. China is the strategist — disciplined, powerful, but carrying extra weight from past choices with age catching up. And then there’s India — the rising challenger, youthful and full of energy, sprinting with ambitions to catch up & vanquish the rivals
This marathon is the race for medium- and long-term economic growth and equity market returns. Each of these economies offers unique strengths and faces pressing challenges. Together, they define the trajectory of global markets in the next 10–30 years.
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United States: The Resilient Veteran
For over a century, the U.S. economy has been the backbone of global growth and financial markets. Even today, it accounts for nearly 25% of global GDP and houses the world’s deepest capital markets.
• Strengths: The U.S. thrives on its innovation engine — Silicon Valley, biotech hubs, green energy, and AI leadership. Consumer spending, which makes up about 70% of GDP, continues to power growth. Institutions remain strong, attracting global capital.
• Challenges: The fiscal debt burden is climbing above 120% of GDP, demographics are aging, and productivity growth is uneven. Rising geopolitical competition also weighs on its long-term outlook. Other nations & central banks are slowly but steadily moving towards de-dollarization which could challenge the Dollar status as world reserve currency. Another big risk is heavy concentration of market growth in a handful of large tech companies, often referred to as FAANG or the "Magnificent Seven". The top 10 stocks, primarily tech giants, can represent over 35% of the S&P 500's total value. The "Magnificent Seven" (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) have driven a majority of the S&P 500's gains in recent years. This creates a scenario where if these stocks perform well, the index looks healthy, even if the other 493 companies are struggling. This masks broader economic weakness
• Equity markets: Despite concerns, U.S. equities have delivered an impressive 10%+ annualized return over the last century. In the next decade, returns are likely to moderate, but 6–8% annualized growth remains plausible, underpinned by innovation-driven companies, banking on IT and AI push.
The U.S. may no longer sprint, but it has mastered the art of consistent long-distance running.
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China: The Strategist at a Crossroads
China’s economic story has been the most dramatic in modern history — lifting over 800 million people out of poverty and becoming the world’s second-largest economy in just four decades. But the marathon has hit a rough patch.
• Strengths: China still leads in manufacturing scale, supply chain dominance, and green energy investments. It has also nurtured global giants in e-commerce, EVs, and renewable technology. Its growing middle class remains a powerful consumer base.
• Challenges: The key property/real estate sector is under severe debt crisis(e.g. leading builder like Evergrande defaulted over $300 billion), demographics are in decline(population shrank in 2022 for the first time in 60 years with median age at 39 years w.r.t. to 28 for India), and private enterprise faces tighter regulation. Foreign investors are cautious due to policy unpredictability. The overall debt-to-GDP ratio remains high at 270%, necessitating caution. Inflation remains subdued at around 1%(almost deflation) which is not a good sign for a strong & growing economy. Manufacturing is showing a contraction for last 5 months(PMI below 50) , which is again pointing to slow down.
• Equity markets: Chinese equities have been highly volatile, often moving with policy cycles. While long-term potential exists in technology, green energy, and consumer upgrades, the medium-term outlook depends heavily on reforms and confidence-building measures.
China remains a strategist who can win bursts of speed — but whether it stays competitive in the long haul depends on its willingness to adapt..
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India: The Rising Challenger
India is the youngest of the three runners, with over 65% of its population under 35. Its marathon has just begun, but the momentum is building quickly.
• Strengths: India combines demographics, digital transformation, and reforms to create a powerful growth cocktail. From UPI’s digital payments revolution to rapid infrastructure expansion, India is unlocking new engines of growth. Services remain strong, while manufacturing and renewable energy are gaining traction. While PLI (Production linked Incentives) scheme has been successfully firing the manufacturing cylinders, Govt has belatedly but surely started making some strong moves on AI research & semiconductors by deploying many billion$ in AI labs and semiconductor fabs
• Challenges: Infrastructure still lags demand, income inequality is significant, and policy consistency will be crucial. Managing urbanization and job creation for its youth will test its resilience.
• Equity markets: Indian equities have historically traded at higher valuations — often justified by faster growth. Over the next 10–20 years, returns of 12-15% annualized (like earlier) are within reach, though accompanied by volatility and political risks.
India is the sprinter with a long runway — capable of delivering outsized returns, but also vulnerable to stumbles if reforms falter.
Here’s the equity market returns chart 📊 comparing the last 20 years of S&P 500, MSCI China, and Nifty 50.
Comparative equity market Outlook: Who Leads in the Next Decades?
The race ahead is not about one economy winning outright, but about how each contributes to the global growth mosaic.
• United States → Stable, resilient, and still the world’s innovation hub. Expected equity returns: 6–8%.
• China → Uncertain, policy-dependent, but with niche opportunities. Expected equity returns: 5–7% with higher volatility.
• India → High-growth potential, demographic advantage, reform-driven. Expected equity returns: 12-14% with volatility.
Global megatrends will shape all three:
• Deglobalization and regionalization of supply chains.
• The green transition reshaping industries.
• Artificial Intelligence as the next productivity revolution.
Together, these shifts will decide whether the runners maintain their rhythm or stumble along.
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Investor Takeaways: Running With All Three
Think back to our marathon. The U.S. runner will likely maintain steady pace. China may sprint or slow unexpectedly, depending on choices ahead. India is accelerating, but needs stamina and consistency.
For investors, the message is clear:
• Diversify across geographies. Each economy has a role to play in balancing stability and growth.
• Focus on themes, not just regions. AI, clean energy, and digitalization will cut across markets.
• Stay long-term. Short-term volatility is inevitable, but the long run rewards patience.
In this marathon of global growth, no single runner defines the race. Instead, the interplay between the U.S., China, and India will set the rhythm of equity markets and shape opportunities for the next generation of investors.
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💡 Closing Thought:
The finish line isn’t in sight — because in the global economy, the race never truly ends. What matters is who keeps running, adapting, and pushing forward. For now, the U.S., China, and India remain the three runners every investor must watch closely.
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A Bonus shot on the sizes of the 3 economies in 2047(@India’s Independence centenary year)
As per the Govt’s “Vikshit Bharat” vision claims(Niti Ayog paper) , India would be 30 Trillion by 2047 , $3rd biggest economy after US & China( much bigger than German & Japan). This would mean an effective GDP growth rate of about 9.5 % on average. That seems bit on the higher side.
Effective GDP growth rate(in $) = Real GDP growth + Consumer Inflation rate – Currency devaluation ($-INR)
Currency devaluation is a function of key factors like Inflation differential , Central bank interest rate differential , Trade/ current account deficit , Capital flows , economic growth & crude prices
India has been showing a real GDP growth of 8% on average in last 18 years (Quadrupling from 1 Trillion in 2007 to 4 Trillion $ economy now) . The current inflation estimate for FY26 & FY27( as per RBI) is 3%. Average INR devaluation has been 3% historically. Hence the Effective GDP growth rate in $ in long term should be 8% , from a historical baseline data perspective( by the above equation). This will take Indian economy to 23 Trillion$ . Effective GDP growth rate (in $ )of 8.5% to 9% will take Indian economy size to 25 to 28 Tril $ but not to 30 Tril $(till we have Cinderella’s magic wand). My take would be that India will grow at 8.5%(effective growth In $), reaching to > 25 $ Trillion(still more than 6 times the current size in 22 years which is huge). INR devaluation might slow down cause of much lower inflation currently(from 7% to 2-3%) , better FDI flows , better current / trade account deficit(0.2% in last quarter) & solid / steady economic growth leading to higher effective GDP growth rate of 8.5% . Besides India’s current push on manufacturing(through China plus 1 strategy , PLI scheme & GST tax reforms) will fire an additional lever to push Indian GDP.
China, which is currently growing at 4-5 % , is projected to grow at 3 to 4%( real GDP growth rate) , cause of demographics (declining median age , decline in working population%), severe real estate debt crisis , global economy slow down impacting its export oriented economy, internal policy uncertainties , current deflation environment etc. Adjusting near zero inflation and average devaluation of 1% (seen in last 10 years),its effective growth rate would be 2.5% and GDP @ 25 Tril $ in 2047(19 Tril $ now)
US economy is at 30 Tril $ today . At projected 2% growth rate , it will reach 46 Tril $ and will continue to be the biggest economy . However , by PPP (Purchasing Power Parity) , Indian and Chinese economies will be bigger than US .
Hence India would be the 2nd biggest by 2047 by exchange value (after US & slightly more than China) & biggest by PPP (overtaking US as INR is undervalued by 3-4 times today with respect to PPP). Currently India GDP is 17 Trill (by PPP) , while its >4 Trill by exchange value . This will be an awesome news for all of us that we will soon become the biggest economy by PPP. This bright long term outlook is definitely going to give a boost to long term equity market returns in India.
Cheers. Happy Investing 😊
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