India (Commonwealth Union)_ According to the latest report by Goldman Sachs, India is on track to become the world’s second-largest economy by 2075, surpassing not only Japan and Germany but also the United States. The report predicts that India’s GDP will reach $52.5 trillion by 2075, trailing behind China’s $57 trillion but surpassing the US’ $51.5 trillion. Currently, India holds the fifth position among the world’s largest economies, lagging behind Germany, Japan, China, and the United States. As per the Economic Survey presented in Parliament earlier this year, the Indian economy was predicted to reach the $3.5 trillion milestone by the end of March.
According to Santanu Sengupta, the India economist at Goldman Sachs Research, to fully realize the potential of its growing population, India must focus on enhancing labor force participation and providing training and skills to its vast pool of talent. UN projections indicate that India overtook China as the world’s most populous country earlier this year. Sengupta emphasized that in the coming two decades, India’s dependency ratio is expected to be among the lowest compared to other regional economies. This favorable ratio between the working-age population and dependents provides India with a crucial opportunity to establish manufacturing capacity, foster the growth of services, and further develop infrastructure. The dependency ratio refers to the proportion of dependents to the total working-age population in a country or region.
Apart from its advantageous demographics, Sengupta noted that innovation and increasing worker productivity will play significant roles in shaping India’s economy, which currently ranks as the world’s fifth largest. Technically, this entails achieving higher output per unit of labor and capital in India’s economy, as explained by the economist. The Goldman Sachs report highlighted the Indian government’s focus on infrastructure development, particularly in the areas of roads and railways. Regarding capital investment, Sengupta mentioned that the government has made substantial efforts in this regard in recent times.
Additionally, given the healthy balance sheets of private corporations and banks in India, the conditions appear favorable for a private sector capital expenditure cycle. The report also highlighted the downside risks to its projections, with one of the key concerns being the labor force participation rate in India. Over the past 15 years, the labor force participation rate has decreased. The report suggests that by creating more opportunities, particularly for women, who have significantly lower labor force participation rates compared to men, India can strengthen its labor force participation rate, thereby further increasing its potential for growth.
