India is set to overtake Japan to become the world’s third-largest economy with a GDP of $7.3 trillion by the end of the decade, S&P Global Market Intelligence said in it’s latest PMI issue. The rating agency said that after two years of robust economic growth in 2021 and 2022, the Indian economy maintained strong growth during the 2023 calendar year.
S&P Global further stated that India’s gross domestic product (GDP) is estimated to increase 6.2-6.3 per cent in the current fiscal year, making it the fastest-growing major economy in the financial year ending March 2024. The near-term outlook for the rest of the fiscal year includes a continuation of rapid expansion helped by robust growth in domestic demand, reported PTI citing the agency.
The rating agency noted that the increase in foreign direct investment inflows into the country in the last ten years shows the favourable long-term growth outlook for the Indian economy, backed by a young demographic profile and rapidly surging urban household incomes. The agency predicted that India’s nominal GDP, measured in US dollars, is set to increase from $3.5 trillion in 2022 to $7.3 trillion by 2030. This momentum of growth would lead to an increase in the size of India’s GDP which will exceed the Japanese GDP by the end of the decade. These developments will result in India becoming the second-largest economy in the Asia-Pacific region by 2030, S&P Global said in it’s issue.
Notably, the agency stated that India’s GDP surpassed the UK’s and France’s GDP in size by 2022. By 2030, it is expected to exceed Germany’s GDP size as well. Currently, the US is the largest economy in the world with a GDP of $25.5 trillion, with the nation making up for a quarter of the global GDP. China follows the US with the second-largest economy with a GDP size of nearly $18 trillion, accounting for about 17.9 per cent of the world’s GDP. Japan ranks third in the list with a GDP of $4.2 trillion, followed by Germany with $4 trillion GDP.
S&P Global cited several factors supporting it’s long-term outlook for the Indian economy. One major positive factor for India remains it’s large and rapidly growing middle class, which helps increase consumer spending, the agency noted. The increasingly growing Indian domestic consumer market along with it’s large industrial sector has helped make India an attractive investment destination for a variety of multinational companies across sectors, including manufacturing, infrastructure, and services.
India’s digital transformation is further expected to increase the growth of e-commerce, helping the retail consumer market evolve in the next ten years. This transformation is making India a lucrative space for global multinational companies in technology and e-commerce.
By the end of the decade, about 1.1 billion Indians are expected to have internet access, more than double the estimated 500 million internet users in 2020. This massive growth in e-commerce and the move to 4G and 5G smartphone technology will help accelerate the domestic unicorns like logistics startup Delhivery, online grocer BigBasket, and e-commerce platform Mensa Brands, among others, the report stated.
The massive expansion in FDI inflows to India over the last five years has helped add to the growth momentum, the agency noted. “Overall, India is expected to continue to be one of the world’s fastest-growing economies over the next decade. This will make India one of the most important long-term growth markets for multinationals in a wide range of industries, including manufacturing industries such as autos, electronics, and chemicals to services industries such as banking, insurance, asset management, health care, and information technology,” the ratings agency added.
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