2023-12-05 15:28:17
India is expected to continue to post the fastest economic growth globally for at least the next three years, enabling it to become the globe’s third-largest economy by 2030, S&P Global Ratings said in a report.
S&P expects India, currently the world’s fifth largest economy, to grow 6.4% this fiscal year. By fiscal 2027, the country is expected to achieve 7% growth.
In comparison, S&P expects China’s growth to slow to 4.6% by 2026, from an estimated 5.4% this year. The country is currently the second largest economy in the world, behind the United States and ahead of Japan and Germany.
According to data released last week, India’s gross domestic product (GDP) grew by 7.6% during the second quarter of 2024, prompting several brokerages to revise upward their estimates for the whole year.
Shift to manufacturing
However, S&P, which had raised its forecast even before the latest data, said India’s growth will depend on whether it successfully transitions from a largely services-driven economy to one dominated by manufacturing.
“A primary test will be whether India can become the next major global manufacturing hub, an immense opportunity,” S&P said in his report Global Credit Outlook 2024, dated December 4.
Although Prime Minister Narendra Modi’s government has encouraged domestic manufacturing through the “Make in India” campaign and production-related incentives, the share of manufacturing still represents around 18% of GDP. In contrast, services account for more than half of India’s GDP.
>> See the Géopolitis topic on India, a rising economic and military power:
India, rising economic and military power / Geopolitis / 2 min. / January 29, 2023
A solid logistics framework
S&P believes that developing a strong logistics framework is essential for India to become a manufacturing hub. The country should also “upskill” its workers and increase women’s participation in the workforce to realize its “demographic dividend.”
India has one of the youngest working populations in the world. Nearly 53% of its citizens are under 30 years old.
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