India is expected to become the third-largest economy in the world with a GDP of $5 trillion in the next three years and touch $7 trillion by 2030 on the back of continued reforms, the finance ministry said on Monday.

Ten years ago, India was the 10th largest economy in the world, with a GDP of $1.9 trillion at current market prices.

Today, it is the 5th largest with a GDP of $3.7 trillion (estimate FY24), despite the pandemic and despite inheriting an economy with macro imbalances and a broken financial sector, said the ministry's January 2024 review of the economy.

"This ten-year journey is marked by several reforms, both substantive and incremental, which have significantly contributed to the country's economic progress," it said.

These reforms, it added, have also delivered an economic resilience that the country will need to deal with unanticipated global shocks in the future.

The ministry said that in the next three years, India is expected to become the third-largest economy in the world, with a GDP of $5 trillion.

"The government has, however, set a higher goal of becoming a 'developed country' by 2047. With the journey of reforms continuing, this goal is achievable," it said.

The Nirmala Sitharaman-headed ministry stressed that the reforms will be more purposeful and fruitful with full participation of state governments.

The participation of states will be fuller when reforms encompass changes in governance at the district, block, and village levels, making them citizen-friendly and small business-friendly and in areas such as health, education, land and labour, in which states have a big role to play, it said.

"The strength of the domestic demand has driven the economy to a 7 per cent plus growth rate in the last three years...in FY25, real GDP growth will likely be closer to 7 per cent," said the review report, and added there is, however, considerable scope for the growth rate to rise well above 7 per cent by 2030.

The review observed that it is eminently possible for the Indian economy to grow in the coming years at a rate above 7 per cent on the strength of the financial sector and other recent and future structural reforms. Only the elevated risk of geopolitical conflicts is an area of concern.

"Furthermore, under a reasonable set of assumptions with respect to the inflation differentials and the exchange rate, India can aspire to become a USD 7 trillion economy in the next six to seven years (by 2030)," it said.

In the preface of the review report, Chief Economic Adviser V Anantha Nageswaran said the Union government has built infrastructure at a historically unprecedented rate, and it has taken the overall public sector capital investment from Rs 5.6 lakh crore in FY15 to Rs 18.6 lakh crore in FY24, as per budget estimates.

He noted that the global economy is struggling to maintain its recovery post-Covid because successive shocks have buffeted it. Some of them, such as supply chain disruptions, have returned in 2024.

If they persist, they will impact trade flows, transportation costs, economic output and inflation worldwide, he said.