India is likely to surpass Japan and Germany and secure the position of the world’s third-largest economy by 2030, as revealed in the latest PMI report by S&P Global Market Intelligence. The anticipated gross domestic product (GDP) of India is set to reach a substantial $7.3 trillion by 2030. In the current fiscal year (FY24), India’s GDP is expected to exhibit remarkable growth between 6.2% and 6.3%, making it the fastest-growing major economy for this fiscal period.
As of the most recent data available, India currently holds the title of the fifth-largest economy globally, with a GDP of $3.7 trillion in the 2023-24 fiscal year. This economic growth marks India’s steady progression, having replaced the United Kingdom as the fifth-largest economy in 2022. The Indian economy, after two years of robust economic expansion in 2021 and 2022, has continued its trajectory of robust growth throughout the calendar year 2023, according to S&P’s analysis. At present, China commands the position of the largest economy in Asia, while the United States maintains its status as the leading global economy.
India’s GDP growth rate surged to an impressive 7.8% year-on-year (YoY) in the second quarter (Q2) of 2023, a notable leap from the 6.1% YoY growth experienced in the first quarter (Q1) of 2023. Private consumption, a significant economic indicator, exhibited a notable increase of 6.0% YoY in Q2 2023, compared to the 2.8% YoY growth in the preceding quarter. Furthermore, India’s gross domestic fixed capital formation experienced a noteworthy 8% growth in the Q2 2023. The construction sector also demonstrated resilience, with a 7.9% YoY growth rate in the April-June quarter of 2023, despite the 10.4% YoY growth seen in the prior quarter. Additionally, the financial, real estate, and professional services sector in India showcased robust growth, registering a substantial 12.2% YoY increase in Q2 2023.
Industrial production continued its upward trajectory, with a remarkable 10.3% YoY growth in August 2023, compared to 6% YoY in July 2023. The manufacturing sector, electricity output, and the production of capital goods have also displayed impressive rates of expansion.
Following the rapid economic growth of 7.2% in the fiscal year 2022-23 (FY23), India’s economic momentum has remained robust, evident in indicators such as industrial production, which increased by 10.3% YoY in August 2023. Moreover, GDP growth persisted at a vigorous rate, achieving a growth rate of 7.8% YoY in the second quarter of 2023. S&P’s report highlights the continuous rapid growth in output, new orders and strong manufacturing conditions. Additionally, there has been a notable reduction in consumer price index (CPI) inflation pressures, with the headline CPI inflation rate moderating to 5.0% YoY in September 2023, down from 6.8% YoY in August 2023.
India has experienced a surge in foreign direct investment (FDI) inflows over the past decade, signalling a positive long-term growth outlook for the Indian economy. Factors contributing to this growth include a youthful demographic profile and the rapid increase in urban household incomes. India has become an increasingly appealing destination for multinationals spanning various industries, with FDI inflows reaching a record high of $85 billion in the fiscal year 2022.
The long-term prospects for the Indian economy are bolstered by key drivers of growth, including a large and expanding middle class that drives consumer spending, a burgeoning domestic consumer market and a substantial industrial sector. The ongoing digital transformation in India is expected to accelerate the growth of e-commerce, reshaping the retail consumer market landscape over the next decade.
Consequently, this has attracted leading global technology and e-commerce multinationals to the Indian market.
Furthermore, S&P’s report projects that by 2030, an estimated 1.1 billion Indians will have internet access, more than doubling the 500 million internet users in 2020. As a result, India is poised to sustain its position as one of the world’s fastest-growing economies over the coming decade, cementing its status as a vital long-term growth market for multinationals across a diverse range of industries, including manufacturing. In its September report, S&P maintained India’s FY24 growth forecast at 6%, citing factors such as the global economic slowdown, the lagged effects of interest rate increases and the growing risk of subnormal monsoons.
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