India is predicted to overtake Japan and Germany to become the world’s third largest economy within the next 10 years.
According to a CNBC broadcast on the 1st (local time), S&P Global predicted that India will rank third in the world by 2030, assuming that India’s annual nominal GDP growth rate remains at an average of 6.3%.
Morgan Stanley also predicted that India’s GDP would more than double its current level by 2031.
Analysts at Morgan Stanley said in their report, “India has the conditions for economic prosperity, such as exports (relocation of production facilities), manufacturing investment, energy transition, and advanced digital infrastructure. It will make it an economic country and the third-largest stock market.”
India’s GDP grew 13.5 percent in the second quarter of this year compared to the same period last year, driven by strong domestic demand and the services sector. In the third quarter, the growth rate of 6.3% was higher than the Reuters forecast of 6.2%.
Experts also praised the Indian government’s efforts to turn the country into a manufacturing powerhouse and foreign investment hub. In particular, they highlighted the PLIS (Production Linked Incentive) program, which provides various incentives, including tax benefits, to domestic and foreign companies that move their production facilities to India. Morgan Stanley predicts that the share of manufacturing in India’s GDP will rise from 15.6% today to 21% by 2031.
However, if macro risks such as a global recession emerge, India’s economy, which is relatively highly dependent on trade, is likely to be hit. In addition, the supply of skilled labor, the possibility of geopolitical events, and political mistakes are also identified as risk factors for the Indian economy.
Sonal Bama, chief economist at Nomura, told CNBC: “India’s real GDP growth rate of 8% has surpassed pre-COVID-19 levels, but looking at the outlook, headwinds are blowing in the global financial environment -wide,” he said.
Jang Ji-min, Hankyung.com guest reporter newsinfo@hankyung.com