India is poised to be the second-largest economy in the world by 2075. Prime Minister Narendra Modi’s government is scaling new heights to achieve these economic targets amidst a growing population.
This is while being the largest democracy in the world. The United States and the European Union have also acknowledged this fact about India’s dramatic economic growth under Prime Minister Narendra Modi’s diligent leadership.
In a recent report, the World Bank said that although significant challenges remain in the global environment, India is one of the fastest-growing economies in the world. Overall growth remains robust and is estimated to be 6.9 percent for the full year. Real GDP grew 7.7 percent year-on-year during the first three quarters of fiscal year (FY) 2022–23.
There were some signs of moderation in FY 22 and FY 23. Growth was underpinned by strong investment activity bolstered by the government’s capex push and buoyant private consumption, particularly among higher-income earners.
In a recent report, CNBC quoted Goldman Sachs research to say: India leapfrogged not just Japan and Germany but the U.S., too. India is the world’s fifth-largest economy, behind Germany, Japan, China, and the U.S., it says.
On top of a burgeoning population, driving the forecast is the country’s progress in innovation and technology. This is driven by higher capital investment and rising worker productivity. This is what the investment bank wrote in a recent report.
"Over the next two decades, India's dependency ratio will be one of the lowest among regional economies," said Goldman Sachs Research’s India economist, Santanu Sengupta.
A country’s dependency ratio is measured by the number of dependents compared to the total working-age population. A low dependency ratio indicates that there are proportionally more working-age adults who can support youth and the elderly. GDP projections for 2075 ($1 trillion) China 57, India 52.5, the U.S. 51.5, the Euro Area 30.3, and Japan 7.5
(Source: Goldman Sachs Research.) Created with the Data wrapper. Sengupta added that the key to unlocking the potential of India’s rapidly growing population is to boost its labour force participation. And Sengupta forecasts that India will have one of the lowest dependency ratios among large economies for the next 20 years.
"So that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, and continuing infrastructure growth," he said.
India’s government prioritises infrastructure creation, especially roads and railways. The country’s recent budget aims to continue 50-year interest-free loan programmes to state governments to spur infrastructure investments. Goldman Sachs believes that this is an appropriate time for the private sector to scale up manufacturing and services in order to generate more jobs and absorb the large labour force.
Spearheading India’s economic trajectory is also its progress in technology and innovation, the investment bank said. India’s technology industry revenue is expected to increase by $245 billion by 2023, according to Nasscom, India’s nongovernmental trade association. That growth will come from across IT, business process management, and software product streams, as Nasscom’s report indicated.
Additionally, Goldman predicted that capital investment would be another significant driver of India’s growth. "India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development. This is likely to increase the pool of capital available to drive further investment," Goldman’s report stated.
The Achilles’ heel of the bank’s projection is the labour force participation rate and whether it increases at the rate Goldman projects. "The labour force participation rate in India has declined over the last 15 years," the report noted. It underlined that women’s participation rate in the labour force is "significantly lower" than men’s.
"A mere 20% of all working-age women in India are employed," the investment bank wrote in a separate report in June. The low figure could be due to women being primarily engaged in piecework, which is not accounted for by formal employment economic measures.
Net exports have also hampered India’s growth because it runs a current account deficit, Goldman said. The bank highlighted, however, that service exports cushion current account balances.
India’s economy is driven by domestic demand, unlike many more export-dependent economies in the region, with up to 60% of its growth mainly attributed to domestic consumption and investments, according to Goldman’s report. S&P Global and Morgan Stanley also predict India will become the third-largest economy by 2030.
India’s first-quarter GDP expanded 6.1% year on year, surpassing Reuters’ expectations of 5% growth. The country’s full-year growth is estimated to be 7.2%, compared with 9.1% growth in the 2021–2022 fiscal year. Indian trade has grown significantly since 2021.
India has already signed agreements with Australia, the United Arab Emirates, and Mauritius. It negotiates deals with the European Union, the United Kingdom, and Canada.
Russia, whose trade with the West has slumped since its invasion of Ukraine last year, is also interested in increasing ties with India. The move is seen as risky, as it requires a tricky balancing act for New Delhi to keep Washington happy while warming up to Moscow. This is according to Shilan Shah, deputy chief emerging markets economist at Capital Economics.
The United States and India have taken steps in recent months to strengthen their ties, particularly in defence and technology. This is as they attempt to counter an increasingly assertive China. In January, the White House launched a partnership with India that Washington hoped would help the countries compete against China in artificial intelligence, military equipment, and semiconductors.
The United States touted the deal as reinforcing "our democratic values and democratic institutions." In February, Air India bought more than 200 aircraft from Boeing (BA) in the American planemaker’s third-biggest sale ever. President Joe Biden hailed "the strength of the US-India economic partnership."
"Together with Prime Minister Modi, I look forward to deepening our partnership even further as we continue to confront shared global challenges," he said, according to CNN. Meanwhile, India has taken yet another step forward in its lunar explorations by launching Chandrayaan 3 to explore the south pole of its less explored moon. Indian technological advancement is taking giant strides and closing in on the United States and China in that respect.
The Chandrayaan-3 spacecraft, with an orbiter, lander, and rover, lifted off at 14:35 today (Friday) from Sriharikota space centre. The lander is due to reach the Moon on August 23–24. If successful, India will be only the fourth country to land a soft landing on the Moon. This follows the US, the former Soviet Union, and China.
Thousands of people watched the launch from the viewer's gallery, and commentators described the sight of the rocket "soaring in the sky" as "majestic". The liftoff was greeted with cheers and loud applause from the crowds and the scientists. "Chandrayaan-3 has started its journey towards the Moon," Indian Space Research Organisation (ISRO) chief Sreedhara Panicker Somanath said.
The third in India's lunar exploration programme, Chandrayaan-3, is expected to build on its earlier Moon missions' success. It comes 13 years after the country's first Moon mission in 2008. This mission conducted "the first and most detailed search for water on the lunar surface and established that the Moon has an atmosphere during the daytime", said Mylswamy Annadurai, Chandrayaan-1 project director.
Chandrayaan-2, which also comprises an orbiter, a lander, and a rover, was launched in July 2019 but was only partially successful. Its orbiter continues to circle and study the Moon today, but the lander and rover failed to make a soft landing and crashed during touchdown. It was because of "a last-minute glitch in the braking system", explained Mr. Annadurai.
Mr. Somanath has said they have carefully studied the data from the last crash and conducted simulation exercises to fix the glitches. It is clear now that India is progressing in every sphere, whether it be in business, technological advancement, or otherwise. If India maintains its momentum, it will overtake Germany in 2026 and knock Japan off the number three spot by 2032. This will enable India to become the third-largest economy in the world in a short span of time.( Inputs from CNBC,CNN and Indian media)
