India is on track to become the world’s third-largest economy by 2027, surpassing Japan and Germany, and have the third-largest stock market by 2030.
GDP Growth forecast
According to the Asian Development Bank (ADB), India’s GDP growth is expected to slow down to 6.4% in the fiscal year 2023, ending on March 31, 2024, but it is predicted to recover and increase to 6.7% in FY 2024. Private spending and investment will be the main drivers of this expansion, which will be aided by government programs aimed at improving the business climate overall and the logistics and transportation sectors (Bank, 2023).
India’s economy grew by 4.4% in the last quarter of the fiscal year, which is lower than the previous quarter’s growth rate of 6.3% and slightly below economists’ expectations of 4.6%. However, this still puts India’s average annual GDP growth for the previous year at around 7%, making it one of the strongest-performing economies in the world. In contrast, the World Bank predicts that the global economy will expand by just 1.7% this year, which would be one of the worst growth rates in over 30 years. The Indian economy has expanded despite the difficulty of rising costs, with the year-over-year retail inflation rate reaching 6.52% in January. The Reserve Bank of India increased interest rates by a quarter of a percent last month, increasing the rate to 6.5%, in an effort to combat the inflation problem (Lasarte, 2023).
Why is India growing fast?
According to a United Nations report, India’s population, which this year is above 1.4 billion people, would overtake China’s by 2023. According to the estimate, India would have a population of 1.412 billion in 2022, compared to China’s 1.426 billion. India is predicted to have 1.668 billion people by 2050, outnumbering China, which is predicted to have 1.317 billion people. India will continue to have a higher percentage of people who are working age, while much of the rest of the globe is seeing an aging population. However, according to Chinese demographers, negative population growth will predominate in China in the coming years, and resolving this issue will necessitate improving population quality and revising economic development strategies. As the population ages, family sizes are likely to shrink, leading to a decrease in demand for housing in the long run, similar to the situation in Japan, according to a report by the State Bank of India. The report notes that structural factors such as demographic aging and economic rebalancing will eventually reduce a significant portion of the demand in the Chinese construction sector (Timesofindia.com, 2022).
India’s impending economic boom
India’s economy, which has already been the fastest-growing economy in the world with a 5.5% average GDP growth over the past decade, is now poised for unprecedented economic growth due to three megatrends: global offshoring, digitalization, and the energy transition. Morgan Stanley’s Chief Equity Strategist for India, Ridham Desai, predicts that India will become the world’s third-largest economy, surpassing Japan and Germany, by 2027 and will have the third-largest stock market by the end of the decade. For investors and businesses, this transition is a once-in-a-generation opportunity. By 2031, the GDP of the nation might more than double from $3.5 trillion to over $7.5 trillion, and its export share could increase by a similar amount. In the next ten years, the Bombay Stock Exchange is predicted to increase by 11% annually and achieve a market capitalization of $10 trillion, underscoring India’s rising influence in the international system (Morgan Stanley, 2022).
Reference
Bank, A.D. (2023). India’s Economy to Grow by 6.4% in FY2023, Rise to 6.7% in FY2024. [online] Asian Development Bank. Available at: https://www.adb.org/news/india-economy-grow-6-4-fy2023-rise-6-7-fy2024#:~:text=NEW%20DELHI%2C%20INDIA%20(4%20April [Accessed 20 April 2023]
Lasarte, D. (2023). India’s GDP growth outpaced China last quarter. [online] World Economic Forum. Available at: https://www.weforum.org/agenda/2023/03/indias-gdp-growth-outpaced-china-economy/ [Accessed 20 April 2023]
Morgan Stanley (2022). India: Asia’s Star of the Next Decade. [online] Morgan Stanley. Available at: https://www.morganstanley.com/ideas/investment-opportunities-in-india [Accessed 20 April 2023]
Timesofindia.com (2022). Explained: Why India’s economy is more resilient than rest of the world. Indiatimes. [online] 20 Sep. Available at: https://timesofindia.indiatimes.com/business/india-business/in-charts-why-indias-economy-is-more-resilient-than-the-rest-of-the-world/articleshow/94320090.cms [Accessed 20 April 2023]
