Indian Economy: from Fifth to Second in the World

According to Goldman Sachs, by 2075 China and India will be at the top of the world economic rankings, and the USA will move to third place.

The Indian economy has all the prerequisites to rise from the current fifth place to the second in the world. But only in 2075, which is still 52 years away. Such a forecast was made by the American investment bank Goldman Sachs, according to which India will be able to overtake not only Japan and Germany, but also the USA in its economic growth, getting as close as possible to China that has been “running in place” in recent economic times.

According to Santanu Sengupta, a leading analyst for India in Goldman Sachs Research, “over the next 20 years, the dependency ratio in India will be reduced to a minimum among all regional economies.” The “dependency ratio” is defined as the ratio between the number of dependents and the total working population. A low dependency ratio means that there are proportionately more adults of working age able to support the young and the elderly in the country.

This highly favorable outlook for India was based on the country’s success in technological innovation, increased investment, and rapid growth in labor productivity. This winning combination of factors will allow India, in the nearest future, to launch many modern production factories, expand service offerings, and strengthen infrastructural networks. In this regard, the government of India funds the neediest states of the country to invest in building the infrastructure. The program was developed for 50 years. According to the largest Indian association Nasscom that includes more than 3,000 companies in the IT sector, “by the end of 2023, the profits of Indian technology companies should grow by another $245 billion.”

Among all these positive factors, according to Goldman Sachs, the real Achilles’ heel is the labor force participation rate, which has been declining in India for 15 years, while female participation is very low: currently only 20% of all Indian women of working age have a job.

But unlike many other countries of Greater Eurasia, whose economies depend on exports, the Indian economy grows and develops primarily due to domestic demand. “About 60% of Indian economic growth,” wrote Goldman Sachs, “is provided by domestic consumption and ever-increasing investments.”

According to Santanu Sengupta’s calculations, by 2075 the economies of the leading countries should reach the following sizes:

China – $57,000 billion

India – $52,500 billion

USA – $51,500 billion

Eurozone – $30,300 billion

Japan – $7,500 billion