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India to overtake Japan as third largest economy by 2028 : Bank of America report

The report also said that falling dependency ratios, financial maturity and increasing incomes and affordability would be the key drivers that would lead to the country's growth.

By: Express Web Desk | New Delhi | Published: November 13, 2017 9:40 pm
public sector banks, state bank of india, sbi, economic growth, fiscal growth, gdp, india economy, business news, indian express news India would emerge as the fifth largest economy of the world by 2019.

India may emerge as the third largest economy in the world overtaking Japan in the coming ten years, according to a report by Bank of America Merrill Lynch. The report also said that falling dependency ratios, financial maturity and increasing incomes and affordability would be the key drivers that would lead to the country’s growth.

“We see India crossing Germany and Japan in nominal GDP in dollar term by 2028. This assumes that the Indian economy grows at 10 per cent (in nominal US GDP) in the next decade, well ahead of Japan’s 1.6 per cent,” the foreign brokerage report said. The report titled ‘India 2028: The last BRICK in the Wall’, has projected the country’s real GDP growth at 7 per cent potential and that India would emerge as the fifth largest economy of the world by 2019.

“First, falling dependency ratios should raise savings and investment rates. Second, financial maturity, due to financial liberalisation and inclusion, should continue to lower lending rates structurally. Finally, increasing incomes and affordability will likely underpin the emergence of mass markets, supporting an expected 7 per cent real GDP growth,” the report said.

It also said that the dependency ratio would be around 46.2 per cent that would in-turn help in sustaining the savings rate at 32 per cent of GDP, at the least, in 2028, comparable to 31.4 per cent during 2000-17. This increase in savings rate should push the rate of investment up to 35 per cent of GDP in 2028 from the current 32.4 per cent. “This, in turn, should lift growth to 10 per cent from 7.1 per cent last fiscal holding the incremental capital-output ratio at current 4.8 levels,” the report said.

“We continue to expect RBI to recoup forex reserves to guard against contagion, in contrast, to import cover almost halving since 2008. This should contain depreciation to 3 per cent a year over the next 10 years,” the report said. It also said that the credit to GDP ratio, a proxy for financial maturity, will likely climb to 83 per cent of GDP from 44 per cent (2001-17).

The bank report also suggested that the growth will be driven by the services and that mass markets powered by rising incomes, on the demand side, as well as economies of scale, on the supply side, would emerge.

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  1. D
    Demented bhakt
    Nov 14, 2017 at 4:58 am
    Bank of America is P A K I. Shri Modiji has predicted that India will overtake Japan economy in 2020, and those guys are predicting in 2028. How audacious.
    1. S
      Nov 14, 2017 at 4:56 am
      Even BoA cannot predict even if it will exist in 2028 leave alone it predicting Indian economy. Has Arya pannis in India sneaked any Brahmin pig in BoA too. I know it sneaked all Brahmin pigs as managers in all Indian banks. Stupid jerk clerks.
      1. U
        Nov 14, 2017 at 4:51 am
        All NRIs, if you have any money in BoA, then withdraw them immediately and deposit them in some other bank. BoA must have had an agreement with Indics to inform who has how much in their account and then all your hard earned $ will be demonetized.
        1. M
          Nov 14, 2017 at 3:26 am
          If India elects good leaders we can achieve this goal. At least minimal steps from current Govt helps 1) fraud in Education (medical and corporate colleges) improve education 2) Strict rules for Bank defaulters (punish all politicians and bank officers involve in deals) for remaining 1.5 year terms helps
          1. M
            Nov 14, 2017 at 2:36 am
            Modi Governments structural reforms have been used as "Political Football" by this paper and the party it favours, Congress. Well informed Indians do NOT get a chance to voice their ASSESSMENTS of GST and DeMon, because Indian Media will NOT give them a chance. I am thinking of people like Sri. S. Gurumurthy, a practising CA with knowledge of Public Finance or Mukul Asher, Professor of Economics in Singapore. Many articles by Western Economists appear in many foreign journals have appeared which praise Modi Government's initiatives, while Indians remain ignorant because of the MISREPRESENTATIONS going on in the Indian Media. At least IE has published this above report, telling us about the OPINION of Merrill Lynch and Bank of America.
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