Goldman Sachs Research predicts that by 2075, India will overtake the United States and become the world’s second-largest economy. Now, India holds the fifth position in terms of global economy, following Germany, Japan, China, and the United States.
India’s 1.4 billion people are set to boost its economy in the years ahead. The population, already the largest in the world, will play a significant role in shaping India’s economic future.
To fully benefit from its growing population, India needs to focus on increasing the number of people participating in the workforce and providing training and skills to its talented workers. This will lead to greater productivity and output per worker. Considering the amount of money invested is crucial due to the expected rise in savings in India. The rise is due to fewer people relying on others, more money earned, and a stronger financial sector. Santanu Sengupta, an economist at Goldman Sachs Research, believes that the conditions are favorable for increased private sector spending, given the healthy financial positions of private companies and banks in India.
India’s favorable demographics, including a large and relatively young population, will also contribute to its potential for economic growth. Sengupta predicts that India will have one of the lowest dependency ratios among major economies in the next 20 years.
Sengupta emphasizes the importance of India seizing the current opportunity to establish manufacturing capacity, further develop its services sector, and expand infrastructure. However, effectively utilizing the labor force and increasing labor force participation rate are key challenges that require creating employment opportunities and investing in training and upskilling programs.
Sengupta also discusses potential risks to India’s economic growth. One significant downside risk is if the labor force participation rate, especially among women, fails to increase. On the upside, growth potential can come from higher productivity resulting from digitalization, wider Internet access, and the implementation of the Aadhaar system, which facilitates public service delivery, expands credit availability, and improves productivity.