S&P expects the Indian economy to grow an average of 6.7% through 2031 amid near-term challenges
Employees work at their terminals at the office of Manubhai & Shah LLP, a local accounting firm, in Ahmedabad, India, July 4, 2023. REUTERS/Amit Dave/File Photo Acquire Licensing Rights
NEW DELHI, Aug 16 (Reuters) – (This Aug 3 story has been corrected to allow India to overtake “Japan and Germany” rather than “Japan and China” in Paragraph 6.)
S&P Global on Thursday forecast that India’s economy will grow at a compound annual rate of 6.7% through March 2031, driven by manufacturing and services exports and consumer demand, despite near-term challenges from interest rate hikes and a global slowdown.
S&P maintained its earlier forecast of 6% growth for the current fiscal year through March 2024, noting that even at this pace, India will be the fastest-growing economy in the G20.
Last month, the International Monetary Fund raised its growth forecast for India by 0.2 percentage points to 6.1% for the current fiscal year, while the central bank forecast an increase of 6.5%.
“As the world finds itself in the midst of an unprecedented period of transition and uncertainty, India faces a crucial opportunity to seize this moment,” said S&P Global in its Look Forward: India’s Moment report, published in Delhi.
S&P Global expects the economy to grow in size from $3.4 trillion to $6.7 trillion in fiscal 2023, leading to an increase in GDP per capita to about $4,500 could.
Should this happen, India would overtake Japan and Germany to become the third largest economy in the world.
In the manufacturing sector, new opportunities are likely to arise from an accelerating global trend towards supply chain diversification, the report said, as the government offered incentives to manufacturers and improved infrastructure.
The economy should benefit from efficiency gains from tax reforms, government support for digital and physical infrastructure, and mitigating losses from government subsidy transfers.
India’s consumer market is set to more than double by 2031, growing to US$5.2 trillion from US$2.3 trillion in 2022, driven by rising household incomes and increased spending on food and other goods.
“Higher per capita incomes are also likely to increase discretionary spending in areas such as entertainment, communications, restaurants and hotels,” the report said.
According to S&P Global, developing a strong logistics framework will be key to transforming India from a service-dominated economy to a manufacturing-dominated economy, as well as increasing the participation of women in the workforce to generate a demographic dividend.
“India’s ability to become a major global manufacturing hub will be a crucial test of its economic future.”
Reporting by Manoj Kumar; Edited by Toby Chopra
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