September 22, 2023

India’s GDP Poised to Surpass Major Economies, Forecasting Remarkable Growth

India, the world’s second-most populous country, is on the cusp of a remarkable economic transformation. With a projected GDP of $52.5 trillion, India is set to surpass not only Japan and Germany but also challenge the GDP projection of the United States, according to recent forecasts by Goldman Sachs. The nation’s dramatic expansion in GDP is driven by advancements in innovation and technology, increased capital investment, and rising labor productivity.

Goldman Sachs Research’s India economist, Santanu Sengupta, highlighted the favorable demographic factors that contribute to India’s economic potential. He emphasized that India boasts one of the best ratios between its working-age population and the number of dependents, including children and the elderly. This demographic advantage presents a significant opportunity for India to strategically develop its manufacturing capacity, expand services, and invest in critical infrastructure.

Over the next two decades, India’s dependency ratio is expected to be one of the lowest among regional economies, enabling the country to leverage its population dividend for sustained economic growth. The investment bank’s report noted that India’s savings rate is likely to increase further, propelled by declining dependency ratios, rising incomes, and the development of a deeper financial sector. This, in turn, will create a pool of capital available for driving further investment, supporting economic expansion.

However, the report also highlighted the need to address challenges related to labor force participation and productivity. Sengupta acknowledged that the labor force participation rate in India has declined over the past 15 years. To fully harness the potential of its labor force, India must create more opportunities, particularly for women, as their labor force participation rate lags significantly behind that of men. By bolstering labor force participation, India can unlock its full potential for growth.

India’s economic prowess has already exceeded expectations, with the first-quarter GDP recording a robust 6.1% year-on-year growth. Notably, renowned reports from Morgan Stanley and S&P Global have also forecasted India’s ascension to become the world’s third-largest economy by 2030.

As India’s economic trajectory continues its upward trajectory, it is crucial for the nation to capitalize on this momentum by implementing strategic policies, fostering innovation, and further developing its workforce. With a favorable demographic profile and a commitment to investing in critical sectors, India is well-positioned to solidify its place as a global economic powerhouse in the years to come.