India is on track to claim the title of the world’s third-largest economy by 2030, according to the latest report from S&P Global Ratings. The report, titled ‘Global Credit Outlook 2024: New Risks, New Playbook,’ outlines India’s potential to outpace other major economies in the coming years, contingent on a successful transition from a service-oriented to a manufacturing-driven economy.
Manufacturing Hub Potential:
S&P Global Ratings underscores India’s critical test of becoming a global manufacturing hub.
Development of a robust logistics framework identified as key for the transformation from a service-centric to a manufacturing-centric economy.
Growth Forecast:
India’s growth rate projected at 6.4% in 2023-24 (down from 7.2% in the previous year).
Anticipated continuation of 6.4% growth in 2024-25, with subsequent increases to 6.9% and 7% in 2025-26 and 2026-27, respectively.
Economic Ranking:
Currently the fifth-largest economy globally, trailing behind the US, China, Germany, and Japan.
Shift expected in Asia-Pacific’s growth engine from China to South and Southeast Asia.
Recent Economic Performance:
Recent national accounts data from the National Statistical Office reveals a robust 7.6% growth in India’s economy for July-September, surpassing expectations. This growth is attributed to increased manufacturing, corporate profitability, and investments, while the services sector witnessed a moderation.
S&P Recommendations:
- Unlocking labor market potential through upskilling workers and increasing female workforce participation.
- Emphasis on a booming domestic digital market for expansion in high-growth startup ecosystems.
- Positive outlook for India’s automotive sector, building on infrastructure, investment, and innovation.
Cautionary Notes:
- Low policy predictability, especially in emerging economies with 2024 elections, may undermine investor sentiment.
- Policy visibility deemed critical for attracting investments and capitalizing on structural opportunities.
Global Economic Landscape:
S&P Global Ratings also raises concerns about the impact of high interest rates on global growth, highlighting potential risks such as tight financing conditions, inflation, geopolitical tensions, and cyber threats. The report underscores the emerging structural risks associated with climate change and the increasing systemic risks posed by cyber threats.
Conclusion: As India charts its course toward becoming the third-largest economy globally, the report concludes with a call for strategic measures to navigate challenges and leverage opportunities. The economic landscape, both nationally and globally, is poised for shifts, and India’s ability to adapt and innovate will be pivotal in shaping its economic trajectory.
