August 4, 2023
India is poised to achieve remarkable economic growth over the next decade, with S&P Global projecting that the country’s GDP could skyrocket to USD 6.7 trillion by 2031, from its current USD 3.4 trillion level. The S&P Global report, titled ‘Look Forward: India’s Money,’ outlines a potential pathway for the nation to attain this ambitious goal, relying on an average growth rate of 6.7 per cent over seven years, starting from fiscal 2024.
The Indian economy’s impressive trajectory was underlined by a GDP growth rate of 7.2 per cent in the 2022-23 fiscal year. However, the report cautions that global economic challenges and the lagged impact of a policy rate hike by the Reserve Bank of India (RBI) might temper growth to 6 per cent in the current fiscal year.
To achieve the projected GDP expansion, India must focus on transforming historically uneven growth patterns into a more stable and sustained trend. Key contributors to this goal include increased capital accumulation, with both the government and private sector investing in infrastructure and manufacturing.
The report’s authors, including S&P Global Ratings Global Chief Economist Paul Gruenwald, Crisil Chief Economist Dharmakirti Joshi, and S&P Global Market Intelligence Chief Economist Asia Pacific Rajiv Biswas, emphasized the critical role of reforms such as the Goods and Services Tax (GST) and the implementation of the Insolvency and Bankruptcy Code to promote a healthy credit culture and foster growth.
Although the Indian economy is recalibrating towards manufacturing, services are expected to retain a robust presence. The report acknowledges that achieving sustained growth will require significant structural reforms in three key areas:
1. Enhancing labor participation, particularly among women, and bolstering skills development.
2. Encouraging private investment in the manufacturing sector.
3. Strengthening external competitiveness through Foreign Direct Investment (FDI).
Experts predict that India’s growth will peak around fiscal year 2025-26, fueled by the combination of supportive policies, favorable demographics, and a massive domestic market. Gradual improvements in global competitiveness will further attract foreign investment to the nation.
If India successfully navigates the macroeconomic challenges and implements the necessary structural reforms, it has the potential to become a dominant global economic player by 2031. Per capita GDP is expected to rise to approximately USD 4,500, signifying an improved standard of living for the population.
As the nation embarks on this transformative journey, policymakers and stakeholders must work collaboratively to foster a conducive economic environment that encourages innovation, investment, and inclusivity. India’s potential to ascend to a USD 6.7 trillion economy is a testament to its resilience, determination, and commitment to progress on the global stage.
