India’s Economic Outlook: A Path to Becoming the World’s Third-Largest Economy by 2030
India is projected to maintain its position as the fastest-growing major economy over the next three years, positioning it to become the world’s third-largest economy by 2030, according to a report by S&P Global Ratings. The country, currently the fifth-largest economy globally, is expected to achieve a growth rate of 6.4% in the current fiscal year, with an estimated increase to 7% by fiscal 2027. In contrast, S&P anticipates a slowdown in China’s growth to 4.6% by 2026.
India’s GDP exceeded expectations by growing 7.6% in the second quarter of fiscal 2024, leading several brokerages to revise their full-year estimates upward. However, S&P emphasizes that India’s growth trajectory hinges on a successful shift from a services-dominated economy to one dominated by manufacturing. The report underscores the need for India to become a global manufacturing hub, presenting a significant opportunity.
While the government, led by Prime Minister Narendra Modi, has actively promoted domestic manufacturing through initiatives like “Make in India” and production-linked incentives (PLIs), the manufacturing sector still constitutes approximately 18% of the GDP. In contrast, services contribute to over half of India’s GDP. S&P highlights the critical importance of developing a robust logistics framework to support India’s aspirations to become a manufacturing hub.
The report also emphasizes the necessity of “upskilling” the workforce and increasing female participation in the workforce to fully capitalize on India’s demographic dividend. With nearly 53% of its citizens under the age of 30, India possesses one of the youngest working populations globally. S&P suggests that these demographic advantages can be realized through strategic investments in skill development and initiatives to enhance female workforce participation.
In conclusion, S&P identifies key challenges and opportunities for India’s economic growth, emphasizing the pivotal role of transitioning to a manufacturing-focused economy, strengthening logistics infrastructure, and addressing workforce development to harness its demographic dividend.
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