In its latest report, the world’s leading investment bank organisation, Goldman Sachs, reported that India is set to become the second-largest economy by 2075, leaving not just Japan and Germany but also the United States of America.
Currently, India is the fifth largest economy in the world, behind Germany, Japan, China and the US. Innovation and technology along with higher capital and investment and rising worker productivity will help India’s economy in the coming years, the investment bank reported.
As per Goldman Sachs research economist Sanatanu Sengupta said-“Over the next two decades, the dependency ratio of India will be the lowest among regional economies,” Adding further, the economist said that the key to drawing out the potential of India’s rapidly growing population is to boost the participation of its labour force. India will have the lowest dependency ratios among large economies for the next twenty years.
“Yes, the country has demographics on its side, but that is not going to be the only driver of the Gross Domestic Product (GDP). Innovation and an increase in work productivity are going to be important for the fifth-largest economy. In technical terms, that means greater output for each unit of labour and capital in India’s economy,” he said.
The report highlighted government placed a priority on infrastructure creation, especially in the set-up of roads and railways.
He explained- “So that really is the window for India to get it right in terms of setting up a manufacturing facility, continue to grow service and infrastructure.” The investment bank also said in its report that this is an appropriate time for the private sector to scale up on creating capacity in manufacturing and services. This will help in generating more jobs in the country and absorb a large labour force.
Additionally, the bank asserted that capital investment will be another significant driver for India’s growth. “India’s savings rate is likely to increase with the falling dependency ratios, rising incomes and deeper financial sector development which is likely to make the pool capital available to drive further investment,” the bank stated.
“The labour force participation rate in India has declined over the last fifteen years,” the report noted. Women’s participation rate in the labour force is significantly lower than men, it said, adding that “a mere twenty per cent of working of all women in India are in employment The low figure could be due to the women being primarily engaged in work not accounted for economic measures of employment,” it said.
The net export has also been a drag on economics because India runs a current account deficit, the bank said. S&P Global and Morgan Stanley have also predicted that India is on course to become the third-largest economy by 2030.
India’s economy is driven by domestic demand, unlike many more export-dependent economies in the region, with up to 60 per cent of its growth mainly attributed to domestic consumptions and investments, the Goldman Sachs report said.
Regarding green energy, India has ambitious targets aiming for net zero emissions by 2070, 50 per cent power generation capacity from non-fossil fuels by 2030 and a focus on green hydrogen and electric vehicles. India has shown resilience in external balancing dynamics driven by structural improvements in the current accounts, service exports and strategic reserve buffers, said the report.
The investment bank said innovation and technology are going to be important for India’s trajectory. Meanwhile, NASSCOM India’s non-governmental trade association said that the technology industry revenue of the country is expected to grow by 245 billion USD by the end of 2023. That growth will come from across the IT, business process management and software product streams, NASSCOM reported.
