“India: A Vision Towards Becoming the World’s Second Largest Economy by 2075 – Goldman Sachs Insights”
In just over 50 years, the nominal GDP of the country will reach $52.5 trillion.
According to a recent forecast by Goldman Sachs, India is expected to become the world’s second-largest economy by 2075.
Based on the country’s present economic trends and potential growth drivers, this prediction offers a fascinating and optimistic view of India’s potential.
According to Goldman Sachs Research, a number of variables, including a growing population, advances in innovation and technology, more significant capital investments, and improving worker productivity, may make India the second-largest economy in the world by 2075.
According to the report, India’s GDP at current prices might be $52.5 trillion in 2075, while China’s economy, which would then be the largest in the world, was predicted to be $57 trillion in size. With a $51.5 trillion GDP, the United States may be third from last.
According to IMF data, the Indian economy passed the UK’s to take over as the fifth-largest globally, behind Germany, Japan, China, and the US. India had the eleventh-largest GDP in the world ten years ago.
The IMF projects that India will have the fourth-largest economy by 2027, surpassing Germany and maintaining its advantage over the UK.
As of 2023, according to World Bank data, India is the fifth-largest economy globally, with a nominal Gross Domestic Product (GDP) of approximately $3.4 trillion. Information technology, telecommunications, textiles, chemicals, pharmaceuticals, biotechnology, steel, aerospace, and shipbuilding primarily drive this substantial economy.
However, Goldman Sachs’ analysis delves deeper into India’s promising economic potential. This potential is anchored on critical factors such as a large, young population, sustained domestic demand, increasing technology adoption, and progressively proactive governmental policies aimed at fostering economic growth and development.
The agency’s expected growth in the country’s labour force participation rate is a requirement for the projection, which means a considerably more considerable proportion of the expanding population must be made suitable for employment.
It should be mentioned that the investment bank stated in a research from June that just 20% of Indian women of working age are employed.
The economist for India at Goldman Sachs Research, Santanu Sengupta, predicted that India’s dependence ratio will be among the lowest in the area during the next 20 years. India now has one of the finest ratios between its population of working age and its people of children and older people. Consequently, Sengupta added, “That is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, and continuing the growth of infrastructure.”
India’s demographic dividend is a primary driving factor towards economic growth. It is one of the youngest nations in the world, with about 65% of its population being below 35 years of age as of 2023. This robust, young, and dynamic workforce could propel India’s growth through increased productivity, provided they are well-equipped with the necessary skills and education.
With an estimated 1.4 billion people, India possesses a colossal domestic market. Rising income levels, urbanization, and an expanding middle class have collectively increased consumer demand. This sustained demand is expected to drive various sectors’ growth, thereby aiding overall economic progress.
The rise of technology and digital transformation is another pillar of India’s growth story. The country’s information technology sector, already an economic powerhouse, continues to show remarkable growth, coupled with the booming startup ecosystem. The increasing adoption of digital technologies in everyday life, from digital payments to online learning and telemedicine, is expected to play a significant role in driving India’s economic growth.
Over the years, the Indian government has taken several proactive measures to attract foreign investments and spur domestic growth. The policies such as “Make in India,” “Digital India,” and the recent changes in labour laws and corporate taxation have created a better business environment. Also, India’s emphasis on infrastructure development is expected to boost the economy significantly.
Despite the promising trajectory, the journey to the second-largest economy will not be without its challenges. India needs to address issues such as the need for comprehensive educational reform, inadequate healthcare, socio-economic disparity, and climate change. However, if these challenges are adequately managed, and the potential growth drivers harnessed effectively, India’s journey towards becoming the world’s second-largest economy could well be within reach.
Sengupta said in an article on the Goldman Sachs website, “India has made more progress in innovation and technology than some may appreciate. The nation’s demographics are favourable, but GDP will not just be influenced by demography. The fifth-largest economy in the world will need to adopt innovative practises and boost worker productivity. The Indian economy will produce more goods and services per unit of labour and capital in technical terms.
The future expansion would also be significantly fueled by capital investment, he continued. India’s savings rate, driven by favourable demographics, is predicted to rise with declining dependence ratios, growing incomes, and more profound financial sector growth, expected to enhance the pool of capital available to fuel more investment.
“The government has recently performed labour-intensive tasks on this front. However, we think that the environment is favourable for a private sector capex cycle, given the strong balance sheets of Indian private corporations and banks.
Despite the fact that the country’s potential for growth will be boosted by favourable demographics throughout the projection period, the issue is to use the work force more effectively by raising the labour force participation rate. That will include giving this work force the chance to be absorbed while also retraining and upgrading the labour force.
Goldman Sachs’ prediction emphasizes the crucial role India could play on the global stage by 2075. It underscores the need for the country to capitalize on its strengths and strategically address its challenges, making the journey to the top an intriguing prospect to observe in the coming decades.
