The Business Bytes
New Delhi, October 17, 2024 (TBB Bureau): India is poised to become the fastest-growing major economy over the next three years and is projected to rank as the third-largest economy globally by 2030, according to a recent report from S&P Global.
The report highlights that emerging markets, particularly in the Asia-Pacific region, will play a pivotal role in shaping the global economy through 2035. With an average GDP growth rate of 4.06% during this period, emerging economies will significantly outpace the 1.59% growth forecast for advanced economies. By 2035, these markets are expected to contribute approximately 65% of global economic growth, driven primarily by countries like India, China, Vietnam, and the Philippines.
“India will cement its position as the world’s third-largest economy by 2035, with Indonesia and Brazil ranking eighth and ninth, respectively,” the report stated.
India’s recent inclusion in JP Morgan’s Government Emerging Market Bond Index is expected to unlock substantial resources in domestic capital markets, providing a boost to government funding. However, further improvements in market access and settlement procedures will be essential to attract long-term investments. India has also increased its capital expenditure, strengthening its fiscal flexibility and supporting sustained economic growth, the report noted.
The report also pointed to India’s long-term economic vision, such as the ‘Viksit Bharat’ initiative, which aims to transform the country into a $30 trillion economy by 2047, up from its current $3.6 trillion.
“India, Indonesia, and Brazil have made notable advancements relative to their peers and are positioned to climb further in the next decade,” S&P Global emphasized. India’s favorable policy momentum, combined with Brazil and Indonesia’s improvements in resource availability, particularly in labor and financial capital, is seen as a critical factor in their progress.
India is also positioned to benefit from shifts in global supply chains, especially with its well-developed manufacturing sector and strategic trade ties with the U.S. and other developed markets. Alongside countries like Mexico and Vietnam, India is poised to capitalize on these relocations, further strengthening its industrial base.
In response to global competition and government incentives for local manufacturing in advanced economies, countries like India, Malaysia, and Indonesia have successfully attracted investment and increased exports by leveraging their unique value propositions. “India is following a similar path, focusing on its domestic market while supporting high-tech manufacturing industries,” the report noted.
India’s electronics sector, particularly in smartphone manufacturing, has seen rapid growth, driven by a combination of tariffs and production-linked incentives. This “assembly-to-component” approach has attracted significant investment, further bolstered by the vast potential of India’s consumer market, which is forecast to reach $1.29 trillion in 2024, according to S&P Global Market Intelligence.
India’s export growth is also noteworthy, especially in sectors like apparel, household appliances, electronics, and transport equipment, where export growth rates are expected to range between 8.5% and 9.5% over the next five years. In particular, telecom equipment exports, including smartphones, have grown by 44% annually from 2015 to 2024.
S&P Global emphasized the importance of workforce development in maintaining this growth trajectory. The report suggested that governments need to focus on upskilling their labor forces both through long-term educational reforms and short-term incentives for workplace education, while also addressing the challenge of high-skilled worker emigration or “brain drain.”
