Indian Economy To Become World’s Third Biggest

According to experts, India’s economy is likely to be the third biggest in the world by 2027. Currently sitting at $3.73 trillion USD, India’s economy is $0.5 trillion behind Japan and $0.7 trillion behind Germany. But this seems set to change.

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How Much Growth will there be in the Indian Economy?

The Indian Finance Ministry expects a 7% growth in the Indian economy this fiscal year, and the same again in 2025. They are forecasting an economy of $5 trillion by 2027. V Anantha Nageswaran, India’s chief economic advisor, explained that “The robustness seen in domestic demand, namely, private consumption and investment, traces its origin to the reforms and measures implemented by the government over the last ten years”. He notes “the robustness seen in domestic demand, namely, private consumption and investment” has led to a growth in physical and digital infrastructure. This has helped to boost the economy by increasing the supply of manufacturing.

The First Deputy Managing Director of the International Monetary Fund, Gita Gopinath, made a similar prediction. She said that “India will be the world’s third-largest economy by 2027-28. She said the India economy will contribute 15% of global growth this year and “will be a key driver of economic growth in the years to come”. Other countries in the world are paying attention to what India is doing in this space.”

Morgan Stanley have predicted that India’s overall share of global growth contribution will be 17% between 2023 and 2028. This is a significant uptick from the 10% of 2021.

The Indian economy has already seen an extraordinary period of growth. It was ranked tenth in the world as recently as 2014.

Why is the Indian Economy Growing So Fast?

The growth is coming from many different areas. For example, India’s stocks grew by 20% in 2023, with more and more people worldwide believing in the growth prospects of the country. There is a forecasted earnings growth of 17.8% for India this year, which is one the fastest rates in Asia. HSBC explained that “While foreign investors tend to be active in large caps, it is local investors that dominate the small and mid-cap space, which partly explains the outperformance.”

India makes a lot of money out of exported goods now as well. For example, the country was the second largest exporter of ocean-based goods and services for developing countries in 2020.

Most other advanced economies are slowing down due to high inflation rates and ageing population, meaning the Indian economy has a significant advantage compared to many other countries. India has already overtaken China’s population. Now it is estimated to move past China’s working-age population by 2030.

“The 21st century will be India’s century” – Nirmala Sitharaman

2047 Indian Economy

Growth is expected to continue well into the future. Finance minister Nirmala Sitharaman said that it was a “conservative estimate” to say the Indian GDP will be at $30 trillion by the year 2047. By this stage, Sitharaman expects India to be a developed country.

2075 Indian Economy

Goldman Sachs have argued that the Indian economy could be bigger than that of the US by 2075. China is expected have the world’s largest economy by this time.

Currently, India is the world’s fifth-largest economy, behind the US, China, Japan and Germany. According to Santanu Sengupta, “Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies”. This means the proportion of the working-age population will be very high. Sengupta believes if India uses their growing population to increase the size of their labour force, they will see significant growth in manufacturing and infrastructure.

Conclusion

The Indo-Pacific region is now comfortably the largest economic region in the world. It takes up 60% of global GDP, with 70% of world GDP growth coming from the region through the last decade.

Historically, the Indian economy has drastically fluctuated. In the year 1700, India accounted for almost a quarter of global GDP. In 1993, this number was down to just 1%, but it has grown now to around 3%. There are many different factors that can and will affect the growth of India’s economy going forward. Nonetheless, they do seem to be on a very upward trajectory. This massive nation is drawing closer to becoming a financial powerhouse.