By 2075, India will overtake not just Japan and Germany but also the United States to become the second-largest economy in the world, according to Goldman Sachs. According to a recent assessment by the investment bank, India, the fifth-largest economy in the world, would continue to develop due to its advancements in innovation, technology, capital investment, and increased worker productivity.
Indian economist Santanu Sengupta of Goldman Sachs Research emphasized that one of the main factors boosting India’s economic potential is the country’s low dependence ratio. India has a favorable demographic dividend that may be tapped into for long-term development thanks to a huge number of people who are working compared to those who are reliant. To fully use India’s potential, Sengupta underlined the need of increasing labor force participation as well as optimizing industrial capacity, services expansion, and infrastructure development.
The development of infrastructure, notably in the areas of road and rail networks, has been given top priority by the Indian government. Initiatives to boost infrastructure improvements via interest-free loans to state governments are part of the most recent budget. According to Goldman Sachs, this is a good moment for the private sector to increase its capacity for manufacturing and providing services, creating job possibilities and using the large labor pool.
Innovation and technological progress are also accelerating India’s economic growth. According to Nasscom, India’s non-governmental trade organisation, the country’s technology sector income is expected to rise by $245 billion by the end of 2023, led by IT, business process management, and software product streams. In addition, Goldman Sachs predicts that capital investment will be crucial to India’s growth as higher incomes, a more developed banking sector, and declining dependence ratios are all projected to enhance the pool of money available for further investment.
The bank’s prediction is, however, subject to their assumptions being met about the labor force participation rate. India’s labor force participation rate has decreased over the last 15 years, according to Goldman Sachs, notably among women, whose participation rate is much lower than that of men’s. The study placed a strong emphasis on the need to address gender inequities and enhance women’s access to chances for formal employment.
Despite the fact that domestic demand and investments have been the main drivers of India’s development, Goldman Sachs claims that the country’s current account deficit has made net exports difficult. However, exports of services have helped to mitigate the effects on current account balances. It is important to note that India’s economy differs from other export-dependent nations in the area in that domestic consumption accounts for up to 60% of its total growth.
By 2030, India is expected to overtake the United States as the third-largest economy in the world, according to S&P Global and Morgan Stanley. India’s first-quarter GDP growth of 6.1% above the prior-year level surpassed forecasts, and the nation’s full-year growth is anticipated to be 7.2% as opposed to the 9.1% increase seen in the previous fiscal year.
To guarantee sustainable prosperity and take advantage of the demographic advantage of the nation, officials in India will need to address the labor force participation rate and improve the investment environment.