India is on a trajectory to become the world’s third-largest economy by 2030, according to a report by S&P Global Ratings. The country, currently ranked fifth, is expected to maintain its status as the fastest-growing major economy for the next three years.
S&P projects a growth rate of 6.4% for the ongoing fiscal year, with an anticipated acceleration to 7% by fiscal 2027. This positive outlook contrasts with S&P’s expectations for China, where a slowdown in growth to 4.6% by 2026 is foreseen.
Recent economic data underscores India’s strength, with a 7.6% growth rate in the second quarter of fiscal 2024, surpassing expectations. This robust performance prompted upward revisions of annual estimates by various brokerages.
However, S&P emphasizes the need for India to transition from a services-dominated economy to one centered around manufacturing for sustained growth. The report identifies this shift as a pivotal test for India and highlights the potential of becoming a global manufacturing hub.
While the “Make in India” campaign and production-linked incentives (PLIs) have been driving domestic manufacturing, the sector’s contribution to GDP remains at around 18%, in contrast to services, which make up over half of the economy.
To achieve its manufacturing ambitions, S&P emphasizes the necessity of developing a strong logistics framework. Additionally, the report underscores the importance of “upskilling” the workforce and increasing female participation in the job market to unlock India’s demographic dividend.
With nearly 53% of its citizens under the age of 30, India possesses one of the youngest working populations globally. As the nation pursues economic prominence, addressing these key factors will be crucial in realizing its exceptional potential on the global economic stage, according to S&P Global Ratings.
By: Montel Kamau
Serrari Financial Analyst
5th December, 2023
