By S.Rupsha Mitra: South Asia Correspondent
According to an article on Zee News, 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 the Japanese GDP by 2030, which will position India as the second largest economy in the Asia-Pacific region.
Not just people within the country, but great global analysts, have asserted that India is the next great economic power: Goldman Sachs has predicted it will become the world’s second-largest economy by 2075, and the FT’s Martin Wolf suggests that by 2050, its purchasing power will be 30% larger than that of the United States.
By 2022, the size of the Indian GDP had already become larger than the GDP of the UK and also France. By 2030, India’s GDP is also forecast to surpass Germany, a research study stated.
The long-term outlook for the Indian economy is supported by a number of key growth drivers (human, capital and natural resources). An important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer expenditure.
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 a myriad of sectors, including manufacturing, infrastructure and services.
AN ECONOMIC POTENTIAL WITH A HEADWIND OF 6-8% ANNUAL GROWTH. PLACE YOUR BETS…
The aggravating new source of demand growth comes from India’s urgent need for a green transition. The scale of its economic potential concludes the fact that its energy demand will be enormous. As the third-largest energy-consuming nation, India is already fourth in the world in renewable energy installed capacity. The country has set inspiring targets: installing 500 gigawatts of renewable energy capacity, producing 5 million tons of green hydrogen annually, cutting emissions by 45%, along with a billion tons of CO2 — all by 2030. A 2021 report by the World Economic Forum highlights 50 million net new “green economy” jobs in India — which means more consumers — and $15 trillion in economic opportunity by 2070, with $1 trillion achieved by 2030.
Another transition for India is a more distinctive geopolitical positioning for India, triggered, most significantly, by the growing conflict between China and Western economies, particularly the U.S. This is translating into new business opportunities for India, like — the manufacturing of Apple’s smartphones. With a goal of producing 20 million iPhones a year, 50,000 new jobs will be created by this one project on its own. In addition, when it comes to military-grade technology used for space launches, there is greater chutzpah in India as a host than China and there is already a flourishing ecosystem in place. India has hosted 111 international space launches since 2020, (visit its space agency site here) and successfully landed a rover on the moon in late August.
By 2030, 1.1 billion people in India will have internet access, more than doubling from the estimated 500 million internet users in 2020.
However, one important barrier portrayed in the mind of anyone who has visited India is its lagging infrastructure. Historically, investing in handouts may have been more politically expedient, but the current administration’s popularity has provided greater leeway to invest in infrastructure.
Capital expenditure as a percentage of total government expenditure has increased from 11% in 2010 to a projected 22% this year. Infrastructure expenditure in 2023 saw 33% hike to $122 billion.
The digital transformation of India that is currently underway is expected to drive the growth of e-commerce, changing the retail consumer market landscape over the next ten years. This is appealing to leading global multinationals in technology and e-commerce to the Indian market.
By 2030, 1.1 billion people in India will have internet access, more than doubling from the estimated 500 million internet users in 2020. The rapid growth of e-commerce and the shift to 4G and 5G smartphone technology will boost the economy.
FOREIGN DIRECT INVESTMENT
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 covid years of 2020-2022.
India’s strong FDI inflows have been boosted by large inflows of investments from global technology MNCs such as Google and Facebook that are attracted to India’s large, fast-growing domestic consumer market, as well as a strong upturn in foreign direct investment inflows from manufacturing firms.
Despite impressive growth numbers at the national level, there are still some impediments, as such, economic benefit has been tangled up with inequality. The top 10% of Indians hold 77% of the national wealth (not an issue unique to India of course).
Almost 2 people every second are pushed into poverty because of health care costs. Regional imbalances — southern and western India growing 12% faster than northern and eastern India — will magnify over time.
Having said this, according to Brahma Chellaney, professor of strategic studies at the New Delhi-based Center for Policy Research, India’s geopolitical, economic and cultural clout is growing and accelerating, as is its global footprint. China’s “decline,” as some have begun to call it, is the conclusion of the country’s four-decade-long economic boom, opening new opportunities for the Indian economy and other developing countries.
So, the barriers to economic development, if dealt with pragmatically by India, with a focus towards balanced growth, means India is on course to turn into one of the greatest of economies of the world, as it is already growing and burgeoning.