India to be third largest economy in the world by 2030, says S&P Global Ratings

By 2030, India will be the world’s third-largest economy, S&P Global Ratings said Tuesday in its “Global Credit Outlook 2024” report.

India is currently the fifth largest economy in the world behind the US, China, Germany, and Japan.

The US-based rating also said India’s gross domestic product (GDP) is expected to grow 7 per cent by 2026 from 6.4 per cent projected expansion in the current fiscal.

“We see India reaching 7 per cent in 2026-27 fiscal… India is set to become the third-largest economy by 2030, and we expect it will be the fastest growing major economy in the next three years,” S&P said.

The report comes days after the International Monetary Fund (IMF) projected India to become a USD 5 trillion economy with the third largest GDP in 2027-28.

The India’s economy grew 7.2 per cent in 2022-23 fiscal ended March 2023. India’s GDP expanded 7.8 per cent and 7.6 per cent in the June and September quarters, respectively.

S&P also expects India to be the fastest growing major economy in the next three years.

In its outlook report, S&P Global Ratings, however, said a major test for India would be to unlock the ‘immense opportunity’ and become the next big global manufacturing hub.

“Developing a strong logistics framework will be key in transforming India from a services-dominated economy into a manufacturing-dominant one,” S&P said in its report titled ‘Global Credit Outlook 2024: New Risks, New Playbook’.

The rating agency further said a strong logistics framework will be key in transforming India from a services-dominated economy into a manufacturing-dominant one.

“Unlocking the labour market potential will largely depend upon upskilling workers and increasing female participation in the workforce,” S&P said.

“Success in these two areas will enable India to realize its demographic dividend,” it said.

S&P went on to add that a booming domestic digital market could fuel expansion in India’s high-growth startup ecosystem during the next decade, especially in financial and consumer technology.

In the automotive sector, India is poised for growth, building on infrastructure, investment, and innovation, it added.

S&P further said there are elections (presidential and/or legislative) in more than 50 countries in 2024, many of which could have global ramifications. Both Russia and Ukraine, mired in a war that will soon enter its third year, have presidential elections in March.

Adding a layer of uncertainty to both the Middle East and Russia-Ukraine situations are the US presidential and legislative elections in November, given the different positions in Congress regarding support for additional funding for Ukraine and Israel, S&P said.

It further said many emerging markets, including Indonesia, India, South Africa, and Mexico, will hold elections in 2024. Low levels of policy predictability can undermine investor sentiment and derail existing investment potential.

“Emerging markets still have work to do to reap a bonanza from the … structural opportunities. For instance, enhancing policy visibility will be critical in attracting investments into these developing trends,” S&P said.

With inputs from agencies