India, the world’s fifth largest economy, is likely to overtake Japan to become the world’s third-largest economy with a GDP of $7.3 trillion by 2030, S&P Global Market Intelligence said in its latest issue of PMI.
After two years of rapid economic growth in 2021 and 2022, the Indian economy has continued to show sustained strong growth during the 2023 calendar year.
India’s gross domestic product (GDP) is expected to grow 6.2-6.3 per cent in the fiscal year ending in March 2024, being the fastest-growing major economy this fiscal year. Asia’s third-largest economy grew by a stellar 7.8 per cent in the April-June quarter.
“The near-term economic outlook is for continued rapid expansion during the remainder of 2023 and for 2024, underpinned by strong growth in domestic demand,” S&P Global said.
The acceleration of foreign direct investment inflows into India over the past decade reflects the favourable long-term growth outlook for the Indian economy, helped by a youthful demographic profile and rapidly rising urban household incomes.
“India’s nominal GDP measured in USD terms is forecast to rise from $3.5 trillion in 2022 to $7.3 trillion by 2030. This rapid pace of economic expansion would result in the size of the Indian GDP exceeding Japanese GDP by 2030, making India the second largest economy in the Asia-Pacific region,” it said.
By 2022, the size of the Indian GDP had already become larger than the GDP of the UK and France. By 2030, India’s GDP is also forecast to surpass Germany.
The US at present is the world’s largest economy with a GDP of $25.5 trillion. It makes up for a quarter of the world’s GDP. China is the second largest economy with a GDP size of about $18 trillion, which is almost 17.9 per cent of the world GDP. Japan is a distant third with $4.2 trillion GDP, followed by Germany with $4 trillion GDP.
S&P Global said the long-term outlook for the Indian economy is supported by several key growth drivers.
“An important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. The rapidly growing Indian domestic consumer market as well as its large industrial sector have made India an increasingly important investment destination for a wide range of multinationals in many sectors, including manufacturing, infrastructure and services,” it said.
The digital transformation of India that is currently underway is expected to accelerate the growth of e-commerce, changing the retail consumer market landscape over the next decade. This, S&P Global said, is attracting leading global multinationals in technology and e-commerce to the Indian market.
“By 2030, 1.1 billion Indians will have internet access, more than doubling from the estimated 500 million internet users in 2020,” it said.
“The rapid growth of e-commerce and the shift to 4G and 5G smartphone technology will boost home-grown unicorns like online e-commerce platform Mensa Brands, logistics startup Delhivery and the fast-growing online grocer BigBasket, whose e-sales have surged during the pandemic.
The large increase in FDI inflows to India that has been evident over the past five years is also continuing with strong momentum evident even during the pandemic years of 2020-2022.