India Poised to Become World’s Third-Largest Economy

Feature and Cover India Poised to Become World's Third Largest Economy

India is on course to become the world’s third-largest economy by 2028, driven by its robust macroeconomic indicators, urbanization, a rising middle class, and burgeoning industries.

India is well on its way to cementing its place among the world’s largest economies, having recently surpassed Japan to become the fourth-largest economy. Projections indicate that by 2028, India will surpass Germany to secure the third spot, driven by a Compound Annual Growth Rate (CAGR) of 9% in nominal GDP from 2025 to 2047. This growth trajectory is supported by strong macroeconomic fundamentals, a growing capital market, and ongoing structural reforms.

The resilience of India’s economy is evident despite external pressures, with nominal terms suggesting that India could become a USD 30 trillion economy by 2047. The country’s gross savings to GDP ratio is expected to improve, reaching a projected 48% by 2036-37, which will support investment-led growth. While concerns over the current account balance and currency depreciation persist, the services and manufacturing sectors remain crucial growth drivers.

Urbanization and infrastructure development are poised to be central to India’s economic ascent, with urban areas expected to contribute nearly 70% of India’s GDP by 2036. The country’s urbanization rate is projected to cross 50% in the coming decade, supported by the rise of megacities and megacorridors. Such urban transformation will be backed by significant investments, including more than USD 290 billion annually on infrastructure through 2030.

The growth of India’s middle class is another key factor, with an anticipated increase of more than 597 million people between 2015 and 2040. This demographic change is expected to drive over 75% of expenditure growth, opening up new market opportunities and reducing the percentage of destitute households significantly. States like Maharashtra, Gujarat, and Tamil Nadu are projected to reach a GDP of USD 1 trillion each by 2035, highlighting their role as economic powerhouses.

India’s thriving capital market, characterized by supportive policies and an expanding retail investor base, presents attractive investment opportunities. India has seen a growing interest in equities, with demat account ownership expected to rise significantly by 2035.

The manufacturing sector, supported by initiatives like ‘Make in India’ and ‘Production-Linked Incentive’, aims to exceed USD 2 trillion in exports by 2030. India is diversifying its trade to new markets and negotiating free trade agreements with major economies to bolster its manufacturing and export sectors.

Several industries promise exceptional growth and are central to India’s economic transformation. The automotive industry is expected to significantly expand its production capacity by 2030, while the chemicals sector focuses on specialty chemicals and sustainable production. The oil and gas industry, healthcare, space, and tech sectors also present significant growth opportunities, and combined, these industries shape the core of India’s economic future.

India’s space sector aims to capture a larger share of the global market, while its tech industry is projected to contribute significantly to GDP by 2030. The semiconductor and electronics industry has plans to develop domestic manufacturing capabilities and reduce reliance on imports.

The food and beverages sector is also on track to reach a trillion-dollar milestone by 2030, driven by food processing innovations and modern retail strategies. The synergy between these industries fuels India’s economic transformation, fostering growth and innovation.

As India stands on the brink of becoming an economic powerhouse, its growth trajectory signals a transformative journey. The potential to generate substantial manufacturing value, create new jobs, and lift millions out of poverty marks India’s significant economic transformation as it contributes to reshaping the global economic landscape.

According to Forbes, India’s economic juggernaut is set to accelerate further, creating a promising future for the nation and its people.

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