India is poised to maintain its status as the swiftest-growing major economy over the next three years, propelling it toward claiming the position of the world’s third-largest economy by 2030, according to a report from S&P Global Ratings.
“S&P anticipates that India, presently ranking as the fifth-largest global economy, will witness a growth rate of 6.4% in the ongoing fiscal year, with projections indicating a further acceleration to 7% by fiscal 2027,” as reported by the original article. In contrast, the report foresees a deceleration in China’s growth to 4.6% by 2026 from an estimated 5.4% in the current year.
Recent data revealing a more substantial than expected 7.6% growth in India’s gross domestic product (GDP) during the second quarter of fiscal 2024 has led several brokerages to revise their full-year estimates upward. However, S&P, having revised its forecast prior to this data release, emphasizes that India’s growth trajectory hinges on a successful transition from a services-dominated economy to one dominated by manufacturing.
“A paramount test will be whether India can become the next big global manufacturing hub, an immense opportunity,” emphasizes S&P in its Global Credit Outlook 2024 report dated December 4th. While the Indian government, led by Prime Minister Narendra Modi, has actively promoted domestic manufacturing through initiatives such as the “Make in India” campaign and production-linked incentives (PLIs), the manufacturing sector still contributes only about 18% to the GDP. In stark contrast, services constitute more than half of India’s GDP.
S&P underscores the pivotal role of developing a robust logistics framework for India to truly emerge as a manufacturing hub. Additionally, the report emphasizes the necessity to “upskill” the workforce and boost female participation in the labor force to fully leverage the demographic dividend.
The report notes, “India possesses one of the youngest working populations globally, with nearly 53% of its citizens under the age of 30.” This demographic advantage could be a significant driver of economic growth if the country strategically addresses challenges in its economic structure and focuses on enhancing the capabilities of its workforce.
In essence, S&P’s projections for India’s economic trajectory highlight both the potential for remarkable growth and the challenges that must be addressed for the nation to realize its economic ambitions. As the government continues its efforts to promote manufacturing and economic diversification, the outcomes in the coming years will play a crucial role in shaping India’s position on the global economic stage.