Will Goldman Sachs’ prediction on the Indian economy come true?

India will become the world’s second-largest economy by 2075, Goldman Sachs Research said citing its article – ‘How India could rise to the world’s second-biggest economy’.

“As India’s population of 1.4 billion people becomes the world’s largest, its GDP is forecast to expand dramatically. Goldman Sachs Research projects India will have the world’s second-largest economy by 2075,” it said with a disclaimer that the article is being provided for educational purposes only.

It is globally accepted that India is one of the fastest growing major economies that has surpassed the United Kingdom to claim the position of the fifth largest economy. Earlier this year, on February 25, while addressing the Asia Economic Dialogue in Pune, Union minister for commerce and industry, textiles and consumer affairs, food and public distribution Piyush Goyal said that India would be the third largest economy in four years or so, at best five years. It would mean, India would jump two-notch to place itself after the US and China.

“My own conviction about the way India is growing is that we will drive our economy probably closer to 35-40 trillion-dollar economy by 2047. The desire of every Indian is to be second to none,” Goyal said. In fact, the Indian economy has shown a remarkable performance, it grew rapidly in the last nine years from about $2 trillion economy to $3.5 trillion now and expected to cross $3.75 trillion in 2023.

The article mentioned above says that demographics is not the only basis of Goldman Sachs Research’s long-term forecasts for India’s economy. “India has made more progress in innovation and technology than some may realize. Yes, the country has demographics on its side, but that’s not going to be the only driver of GDP. Innovation and increasing worker productivity are going to be important for the world’s fifth-biggest economy. In technical terms, that means greater output for each unit of labor and capital in India’s economy,” it said.

“Capital investment is also going to be a significant driver of growth going forward. Driven by favorable demographics, India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment,” it added.

Besides focus on public expenditure in the last three budgets, the government’s reformist policies have helped to attract private investment, which will be a major driver in the years to come. The article rightly said “given healthy balance sheets of private corporates and banks in India, we believe that the conditions are conducive for a private sector capex cycle”.

Prime Minister Narendra Modi’s repeated faith in demographic dividend has been well acknowledged in the article. Favourable demographics will add to potential growth over the forecast horizon, the article said. “India’s large population is clearly an opportunity, however the challenge is productively using the labor force, by increasing the labor force participation rate. That will mean creating the opportunities for this labor force to get absorbed and simultaneously training and upskilling the labor force,” it said. The Modi government’s policy focus on Startup India, Standup India and Skilling India are efforts in that direction.

The rapid growth of India in the last nine years has been a conscious effort of the Modi Government. As early as March 30, 2014, PM had tweeted from his twitter handle, “We have demographic dividend, democracy and a large demand. These 3Ds- no other nation has…”. He has transformed his vision into the country’s growth strategy. (EOM)