The economy crystal ball: By 2030, India could be among the big three economies

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Riding powerful drivers such as huge consumption by the expanding middle-class, rising income levels and youthful demographics, by 2030 India will emerge the third-largest economy in the world overtaking powerhouses such as Germany and Japan lagging behind only the US and China, S&P Global Market Intelligence has said.

India’s current position in the economy totem pole is fifth behind all the nations named above. If S&P’s forecast comes true, India will also become the second biggest economy in absolute numbers in Asia and will be bigger than any economy in Europe.

“India’s nominal GDP measured in USD (S) terms is forecast to rise from USD 3.5 trillion in 2022 to USD 7.3 trillion by 2030. This rapid pace of economic expansion would result in the size of (Indian GDP) exceeding Japanese GDP by 2030, making India the (second-largest) economy in the Asia-Pacific region,” S&P Global Market Intelligence wrote in its latest issue of PMI.

However, it needs to be mentioned that S&P Global Market Intelligence did not use the words the “third-largest economy” in reference to India, it was clear when the unit pointed out that by 2022 India’s GDP had surpassed that of France and the UK.

While different bodies have predicted India to become the third-largest economy in the “foreseeable future”, there is no unanimity of views as to when that status could be reached.

International Monetary Fund has stated that India will become the third-largest economy much before 2030. In fact, it might happen in 2027, when India’s GDP could stand reach $5.43 trillion (1 trillion=1 lakh crore) while the German GDP would be just behind at $5.33 trillion. Japan’s GDP would be the fifth biggest at $4.57 trillion. IMF has said that India is expected to overtake Japan in GDP by 2026. In that year, India’s economy could reach $4.95 trillion while Japan could record a GDP of $4.71 trillion. This is a projection where S&P Global Market Intelligence has a different take. It thinks Japan will have a bigger economy than that of Germany in 2030 – the same status as it has right now.

The confidence of agencies such as the IMF and S&P stems from the sustained robust growth rates the Indian economy has been able to generate after the pandemic debacle.

The near-term economic outlook is slated for rapid expansion during the rest of 2023 and 2024. Buoyant domestic demand is expected to underpin these expectations despite the headwinds of slowdown, especially in the developed economies and muted show by the traditional performers such as information technology.

In real and rupee terms, India’s economy grew 6.1% and 7.8% in the first and the second quarters of 2023, and that was the fastest rates of growth clocked by the large economies around the world.

Incidentally, the size of the economy is measured in terms of nominal or current prices. S&P Global also pointed out that strong FDI flows also proved the faith that economies around the world have in the Indian market and held high the long-term growth outlook for the Indian economy.