India to become world’s 3rd largest economy by 2030, S&P Global Ratings predicts but…
Despite making optimistic predictions about India, the American credit rating agency also pointed out the economic path that the South Asian economy would need to follow.
Indian prime minister Narendra Modi listens to a speaker during the inauguration of the Global Exhibition on Services in New Delhi, India, on April 23, 2015. (Photo by PRAKASH SINGH/AFP via Getty Images)
INDIA is poised to continue as the fastest-growing major economy for the next three years and remain on course to emerge as the world’s third-largest economy by 2030, S&P Global Ratings has said in a report.
It anticipates India, presently ranked as the world’s fifth-largest economy, to achieve a growth rate of 6.4 per cent in the current fiscal year, with an estimated increase to seven per cent by fiscal year 2027. In contrast, the report forecasts a slowdown in China’s growth, projecting it to decrease to 4.6 per cent by 2026 from an estimated 5.4 per cent in the current year.
The South Asian economy’s gross domestic product (GDP) surpassed expectations by growing at 7.6 per cent in the second quarter of fiscal 2024, as revealed by data last week. The robust performance saw several brokerages revising their full-year estimates upward.
India’s future growth depends on successful transition to manufacturing
Despite having already increased its forecast prior to the latest data, S&P emphasized that India’s future growth hinges on its successful transition from a services-dominated economy to one dominated by manufacturing.
However, S&P, which had raised its forecast even before the latest data, said India’s growth will depend on its successful transition to a manufacturing-dominated economy from a services-dominated one.
In its Global Credit Outlook 2024 report on Monday (4), S&P said “a paramount test” will be whether the Asian economy can become the next big global manufacturing hub.
The government of prime minister Narendra Modi has been making efforts to promote domestic manufacturing in the country, through campaign such as “Make in India” and production-linked incentives. The share of manufacturing is still roughly around 18 per cent of GDP.
Services, on the other hand, account for more than half of the GDP.
S&P also highlighted the importance of establishing a robust logistics framework for India to evolve into a manufacturing hub.
The report emphasized the need for the country to “upskill” its workforce and enhance female participation to fully capitalise on its “demographic dividend.”
India possesses one of the world’s youngest working populations, with approximately 53 per cent of its citizens being under the age of 30.
(With Reuters inputs)