India’s economy on course to surpass Germany, Japan by 2030

With impressive growth rate being witnessed by the country, S&P Global and Morgan Stanley have now predicted that India is set to overtake Japan and Germany to become the world’s third-largest economy by 2030.

“India has the conditions in place for an economic boom fueled by offshoring, investment in manufacturing, the energy transition, and the country’s advanced digital infrastructure,” Morgan Stanley analysts led by Ridham Desai and Girish Acchipalia said in a report.

The projection comes as experts have been citing abundant low-cost labour, the low cost of manufacturing, openness to investment, business-friendly policies and a young demographic with a strong penchant for consumption as the advantages for India.

India recorded a year-on-year growth of 6.3 percent for the July to September quarter, which is fractionally higher than a poll forecast of 6.2 percent.

But the numbers for the previous quarter were even (April-June) were more impressive – 13.5 percent when compared to a year ago – which was a result of robust domestic demand in the country’s service sector.

The forecast made by S&P Global is based on the projection that India’s annual nominal gross domestic product growth will average 6.3 percent through 2030.

Similarly, Morgan Stanley estimates that India’s GDP is likely to more than double from current levels by 2031. “These drivers will make [India] the world’s third-largest economy and stock market before the end of the decade.”

Last year, India posted a record 20.1 percent year-on-year growth in the three months to June, says the data shared by Refinitiv.

However, S&P Global’s projection is based upon the continuation of India’s trade and financial liberalization, labor market reform, as well as investment in infrastructure and human capital.

It notes Indian government’s clear focus on becoming a hub for foreign investors as well as a manufacturing powerhouse.

Similarly, Morgan Stanley thinks that India’s manufacturing’s share of GDP will rise from the current level of 15.6 percent of GDP to 21 percent by 2031.

It means the manufacturing revenue could increase three times from the current $447 billion to around $1,490 billion.

“Multinationals are more optimistic than ever about investing in India … and the government is encouraging investment by both building infrastructure and supplying land for factories,” Morgan Stanley said.

However, there are some risks that could hamper the progress, namely a prolonged global recession, supply of skilled labour, adverse geopolitical events and policy errors which may arise from voting in a weaker government.

Last week, Indian finance ministry had said that a global slowdown may dampen India’s export businesses outlook.

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