(CTN NEWS) – According to Goldman Sachs, India is expected to surpass not only Japan and Germany but also the United States to become the world’s second-largest economy by 2075.
Currently, India holds the fifth position in terms of global economic rankings, following Germany, Japan, China, and the U.S.
Goldman Sachs attributes this projected advancement to several factors, including a rapidly growing population, advancements in innovation and technology, increased capital investment, and rising worker productivity. I
n a recent report, Santanu Sengupta, the India economist at Goldman Sachs Research, stated that India’s dependency ratio is anticipated to be one of the lowest among regional economies over the next two decades.
The dependency ratio of a country is calculated by comparing the number of dependents (such as children and the elderly) to the total working-age population.
A low dependency ratio signifies a relatively higher proportion of working-age individuals who can provide support for both the younger and older generations.
Maximizing India’s Rapidly Expanding Population: Focus on Workforce Participation
Sengupta emphasized that maximizing the potential of India’s rapidly expanding population hinges on increasing the participation of its workforce.
He also predicts that India will maintain one of the lowest dependency ratios among major economies over the next two decades.
“This presents an opportune moment for India to focus on establishing manufacturing capabilities, sustaining service sector growth, and further developing infrastructure,” he stated.
The Indian government has prioritized infrastructure development, particularly in the construction of roads and railways.
The recent budget of the country aims to extend the 50-year interest-free loan programs to state governments, aiming to stimulate investments in infrastructure.
Goldman Sachs asserts that the present time is ideal for the private sector to scale up manufacturing and service capacities, with the goal of generating more employment opportunities and absorbing the substantial labor force.
India’s Technological Progress and Capital Investment Drive Economic Growth, says Goldman Sachs
Goldman Sachs also highlighted India’s advancements in technology and innovation as a key factor driving its economic trajectory.
According to Nasscom, a non-governmental trade association in India, the revenue of India‘s technology industry is projected to increase by $245 billion by the end of 2023.
This growth will be driven by various sectors, including IT, business process management, and software products, as indicated by Nasscom’s report.
Furthermore, Goldman Sachs predicted that capital investment would serve as another significant driver for India’s economic growth.
The report stated that India’s savings rate is expected to rise due to declining dependency ratios, increasing incomes, and the development of a more robust financial sector.
These factors are likely to expand the pool of capital available for further investment in the country.
India’s Population: From Challenge to Potential Asset
India has undergone a significant shift in its perspective towards population growth and its impact on economic development. Once focused on population control,
India now views its population as a valuable potential asset. However, this demographic advantage also comes with challenges such as increased demand and the need for more job opportunities.
Goldman Sachs Research highlights that capital investment will play a crucial role in driving future economic growth in this context.
As dependency ratios decline and incomes rise, coupled with the development of a more robust financial sector, India’s savings rate is expected to increase. This will create a pool of capital that can be utilized to further drive investments and spur economic growth.
Challenges Ahead for India’s Economic Projection: Labor Force Participation and Export Performance
Goldman Sachs acknowledges that the labor force participation rate is a crucial factor that could impact the realization of its projections.
The report highlights a decline in India’s labor force participation rate over the past 15 years, particularly emphasizing that women’s participation rate is significantly lower compared to men.
According to a separate report by the investment bank in June, a mere 20% of working-age women in India are employed, attributing the low figure to the prevalence of informal piecework that goes unaccounted for in formal employment measures.
Additionally, India’s net exports have hindered its growth due to the country’s current account deficit. However, Goldman Sachs points out that services exports have mitigated the impact on current account balances.
India’s economy is primarily driven by domestic demand, in contrast to many export-oriented economies in the region. Goldman’s report indicates that up to 60% of India’s growth can be attributed to domestic consumption and investments.
S&P Global and Morgan Stanley have also forecasted that India is on track to become the world’s third-largest economy by 2030.
In the first quarter, India’s GDP expanded by 6.1% year-on-year, surpassing expectations of 5% growth by Reuters. The country’s full-year growth is estimated to reach 7.2%, compared to 9.1% growth in the fiscal year 2021-2022.
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