The real gross domestic product of India will average 6.3% yearly growth between fiscal years 2021 and 2030, enabling the country to surpass Japan and Germany in nominal terms. Real GDP per capita will grow at a 5.3% rate as the population of India continues to expand.
“These projections assume continued structural reforms, including trade and financial liberalization, infrastructure and human capital investment, and labor market reform,” wrote the S&P Global analysts. “Although the current government has a parliamentary majority to pass legislation, trade unions are strong, comprise millions of members in sectors highlighted for liberalization, and have routinely opposed policies that they claim threaten job security and increase the influence of big business.”
India had a real GDP of $3.2 trillion as of last year, according to data from the World Bank, while the value of finished goods and services in Japan and Germany respectively amounted to $4.9 trillion and $4.2 trillion. The United States and China are the world’s first and second largest economies, with real output of $23 trillion and $17.7 trillion respectively.
After India gained independence from the United Kingdom in 1947, widespread refugee travel between India and Pakistan provided continued economic strain. India has experienced robust growth since the nation pivoted away from socialism and liberalized trade policy.
The Indian government introduced the Production Linked Incentive Schemes two years ago, a policy regime that encourages foreign and domestic investors to achieve higher manufacturing output through tax rebates, project-specific land acquisition, and license clearance. “A greater share in global value chains would also contribute to India’s goals of improving leverage in multilateral negotiations and gaining advantage in its competition with mainland China,” the S&P Global analysts continued.
India is also slated to eclipse longtime geopolitical rival China as the world’s most populous country next year. The former nation presently maintains a fertility rate of 2.2 children per woman, while the latter has a fertility rate of 1.7 children per woman, according to data from the Organization for Economic Cooperation and Development.
India currently boasts a trade surplus with the United States and a trade deficit with China, the latter of which is viewed as a vulnerability among Indian officials. The dynamic “encourages policymakers to seek alternatives, particularly in pharmaceuticals, automobiles, and electronics, where the aim is to make India a major exporter itself,” according to S&P Global.
India had been experiencing benefits from “small but steady annual increases in economic freedom” before the lockdown-induced recession two years ago, according to a report from the Heritage Foundation’s Index of Economic Freedom, which ranks the country “mostly unfree.” The nation still has lackluster court systems, investment freedom, and government integrity.
“India’s diverse economy encompasses traditional village farming, industrial-scale agriculture, handicrafts, and a wide range of modern industries,” the conservative think tank remarked, noting the importance of internationalization for the nation’s future. “Capitalizing on its well-educated English-speaking population, India has become a major exporter of information technology services, business outsourcing services, and software workers.”