India will become the second largest economy in the world by 2075
India is poised to become the second largest economy in the world by 2075, overtaking not only Japan and Germany, but also the United States, according to US bank Goldman Sachs.
India is currently the fifth largest economy in the world after Germany, Japan, China and the United States.
In addition to India’s surging population growth, the US investment bank wrote in a recent paper, the outlook is driven by advances in innovation and technology, increased capital investment and increased worker productivity.
“Over the next two decades, India’s dependency ratio will be among the lowest among regional economies,” said Indian economist at Goldman Sachs Research Santanu Sengupta.
The dependency ratio in a country is measured by the number of dependents compared to the total population of working age. A low dependency ratio indicates that there are relatively more adults of working age who are able to provide for the young and the elderly.
Sengupta predicted that India would have one of the lowest subsidy ratios among large economies over the next 20 years.
The Government of India has given priority to the construction of infrastructure, particularly in the construction of roads and railways. The latest state budget aims to continue interest-free loan programs for 50 years to state governments in order to stimulate investments in infrastructure.
Goldman Sachs believes that this is the right time for the private sector to expand capacity creation in manufacturing and services in order to create more jobs and absorb the large workforce.
US investment bank Goldman Sachs said that advances in technology and innovation are at the forefront of India’s economic track.
India’s tech industry revenue is expected to increase by $245 billion by the end of 2023, according to Indian non-governmental trade association Nasscom.
The Nasscom report indicated that this growth will come through information technology, business process management and software product flows.
In addition, Goldman Sachs predicted that capital investment will be another important driver for the growth of the Indian economy.
“India’s savings rate is likely to rise as dependency ratios fall, incomes rise, and financial sector development deepens, which could make massive pools of capital available to drive further investment,” Goldman says.
negative risks
The strong Achilles heel of Goldman Sachs’ forecasts is the labor force participation rate – and whether it will rise at the rate the bank expects.
The report noted that “India’s labor force participation rate has declined over the past 15 years,” stressing that women’s labor force participation rate is “significantly lower” than that of men.
“Only 20 percent of women of working age in India are employed,” the investment bank wrote in a separate report in June, suggesting that the low figure could be because women are primarily piece-workers, which were not accounted for. Through economic measures of formal employment.
Goldman said net exports have also been a drag on India’s growth, because India runs a current account deficit. However, the Bank highlighted that service exports were diluting current account balances.
Unlike many export-dependent economies in the region, India’s economy is driven by domestic demand, with up to 60 percent of its growth primarily driven by domestic consumption and investment, according to the US bank’s report.
Forecasts by Standard & Poor’s Global and Morgan Stanley indicate that India will overtake Japan and Germany to become the third largest economy in the world by 2030.
India’s GDP for the first quarter grew by 6.1 percent year-on-year, far exceeding Reuters’ forecasts of 5 percent growth.
It is estimated that the growth rate for the full year in India will be 7.2 percent, compared to 9.1 percent in the 2021-2022 fiscal year.
2023-07-10 08:50:18
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