India’s economy is on track to surpass the United States’ and become the world’s second largest economy behind China in a matter of decades, according to forecasting by Goldman Sachs Research. The fifth-largest economy, will become the world’s second largest economy by 2075 surpassing not only Japan and Germany but also the United States.
Goldman Sachs in a report on Monday said on Indian economy, that India’s innovation and technology, higher capital investment and rising worker productivity is going to increase drastically due to the burgeoning population of the country. All these factors combined will help make India world’s second largest economy very soon.
Currently, India is the world’s fifth-largest economy, behind Germany, Japan, China and the US.
The Goldman Sachs research report said the India’s government has placed a priority on infrastructure creation, especially in the setting up of roads and railways. The country’s recent budget aims to continue the 50-year interest free loan programs to state governments in order to spur investments in infrastructure.
Goldman Sachs GDP forecast for India
As per Goldman Sachs GDP forecast for India, the investment bank’s analysts issued a report last week that projects India will becomes world’s second largest economy knocking the U.S. into third place by 2075, when the Asian nation is expected to reach gross domestic product of $52.5 trillion, which is 1 trillion dollars higher than America’s GDP level is expected to reach at that time.
According to the data, China will pass the U.S. to become the world’s largest economy sometime in the 2030s, and the communist country will have a GDP of $57 trillion by 2075 and India could become world’s second largest economy.
Santanu Sengupta, Goldman Sachs Research India economist, said in the report that the nation’s population, which recently became the world’s largest at 1.4 billion positions it well for growth because it has one of the best ratios between its population of working-age people versus its non-working.
“Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies”, Sengupta said. “So, that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, continuing the growth of infrastructure.”
Goldman Sachs on India’s economy
Goldman Sachs research report said that beyond its demographic advantages, capital investment is also expected to be a significant driver of India’s growth. Goldman Sachs researchers did note there are some risks that could hold India back from reaching its growth forecast. The country’s potential for growth could be hurt if it does not increase its labor force participation rate, which has fallen for the past 15 years and is particularly low among women.
Goldman Sachs believes that this is an appropriate time for the private sector to scale up on creating capacity in manufacturing and services in order to generate more jobs and absorb the large labor force.
Investment and technology
The investment bank said innovation and technology are going to be important for the India’s economic trajectory.
Increased saving rates
“India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment,” the CNN reported quoting citing the Goldman’s report.
Labor force participation
The report mentioned that the main downside risk for India’s economic growth would be if the labor force participation rate does not increase.
India exports
The report said net exports have also been a drag on India’s growth, because the country runs a current account deficit. The bank highlighted, however, that services exports have been cushioning current account balances.
India’s economy is driven by domestic demand, unlike many more export-dependent economies in the region, with up to 60% of its growth mainly attributed to domestic consumption and investments, the Goldman’s report said
Other global rating agencies like S&P Global and Morgan Stanley have also predicted that India is on course to become the third-largest economy by 2030.
Current rating
India is currently the fifth-largest economy in the world with a GDP of $3.73 trillion, according to the International Monetary Fund. That’s behind No. 4 Germany at $4.3 trillion, No. 3 Japan at $4.4 trillion, No. 2 China at $19.37 and No. 1 America at $26.85 trillion.
