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Journalism of Courage
India is poised to become the world’s second largest economy by 2075 with an estimated GDP of $52.2 trillion, surpassing the United States, Germany, and Japan, global investment firm Goldman Sachs has predicted in a report.
While China is forecasted to have the highest GDP of $57 trillion by 2075, the US is expected to be the third-largest economy with a GDP of $51.5 trillion.
Increasing young population, progress in innovation and technology, and higher capital investments are among the factors that will drive India’s growth, the report posits.
“Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies,” said Santanu Sengupta, Goldman Sachs Research’s India economist. He pointed out that India’s population has one of the best ratios between its working-age population and its number of children and elderly. “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,” he said.
“For India, a key to realizing the potential of that growing population is boosting participation within its labor force, as well as providing training and skills for its immense pool of talent,” Sengupta noted.
In addition to having a upper hand in the aspect of demographics, the report suggests that “India has made more progress in innovation and technology than some may realize.” Sengupta heralds innovation and increasing worker productivity to be important factors behind the boost in India’s economy. “In technical terms, that means greater output for each unit of labor and capital in India’s economy,” he states.
Moreover, India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make a pool of capital available to drive further investment.
“On this front, the government has done the heavy-lifting in the recent past. But given healthy balance sheets of private corporates and banks in India, we believe that the conditions are conducive for a private sector capex cycle,” the Goldman Sachs review states.
The main downside risk to India’s economic expansion would be if the labor force participation rate does not increase, as per the report. The labor force participation rate in India has declined over the last 15 years.
“If you have more opportunities — especially for women, because the women’s labor force participation rate is significantly lower than men’s — you can shore up your labor force participation rate, which can further increase your potential growth,” the Goldman Sachs economist suggests.
India is currently the fifth-largest economy in the world, with the US, China, Japan, and Germany holding the top four positions.
