In a report by Goldman Sachs, India’s economic capabilities are set to soar, with projections indicating that it will emerge as the world’s second-largest economy by 2075, surpassed only by China. Fueled by its massive population of 1.4 billion people, India’s GDP is expected to experience a dramatic expansion, reaching $52.5 trillion and surpassing the United States to claim the second position.
The report highlights several key factors that will contribute to India’s remarkable growth.
- The country’s labor force, which boasts a favorable ratio between its working-age population and the number of dependents. According to the Goldman Sachs analysis, India’s large population presents a significant opportunity. To capitalize this, India must create ample employment opportunities while simultaneously providing training and upskilling programs to enhance the skills of its workforce.
- The innovation and technology of the country has experienced considerable progress. The report underscores the importance of innovation and increasing worker productivity as crucial elements for India’s ascent to becoming the world’s second-largest economy. Enhancing output per unit of labor and capital will play a pivotal role in propelling the growth of India’s economy. Notably, India’s technology industry is expected to witness remarkable revenue growth, with projections indicating an increase of $245 billion by the end of 2023, as per a report by Nasscom, India’s non-governmental trade association.
- India’s favorable demographics, characterized by falling dependency ratios and rising incomes, will also play a vital role in its economic transformation. The report predicts a rise in the savings rate, driven by a deeper development of the financial sector. As a result, India will benefit from a substantial pool of capital that can be deployed for further investment, fueling economic expansion.
- The significance of infrastructure development is already being recognized by the Indian government, prioritizing initiatives such as the establishment of roads and railways. In the recent budget, the government extended interest-free loan programs to state governments, with a focus on stimulating infrastructure investments. Goldman Sachs advocates for increased private sector participation, urging corporations to seize the opportunity to contribute to manufacturing and services sectors, generating more jobs and effectively absorbing the substantial labor force.
While the report presents an optimistic outlook for India’s economic trajectory, it also underscores the potential challenges that lie ahead. One significant concern is the decline in India’s labor force participation rate over the past 15 years. Addressing this issue is critical, with a particular emphasis on creating more opportunities for women, whose labor force participation rate remains significantly lower than that of men. By ensuring equal participation and inclusive growth, India can strengthen its labor force and unlock its full growth potential.
India’s remarkable economic performance over the past decade underscores its ascent. The country’s economy has experienced a remarkable growth spurt, surging from a $2 trillion economy nine years ago to its current size of $3.5 trillion. Projections indicate that India’s GDP is expected to cross the $3.75 trillion mark in 2023 itself.
Prime Minister Narendra Modi’s long-sighted approach has played a pivotal role in leveraging India’s demographic dividend. His belief in the confluence of demographic advantage, democracy, and growing demand since he assumed the office in 2014 has been a guiding force for the country’s growth strategy. The report acknowledges the Indian government’s proactive efforts in driving economic progress. Moreover, given the healthy balance sheets of Indian corporates and banks, the conditions are ripe for a private sector capital expenditure cycle, according to Goldman Sachs.
As India continues its upward trajectory, these projections offer valuable insights into the factors that will shape the country’s future. By consistently addressing these economic drivers with planning and concerted efforts, India is on track to becoming a global economic powerhouse as the world’s second-largest economy by 2075, transforming the lives of its people and leaving a solid mark on the world stage.
