India, which is currently the world's fifth largest economy, might surpass Japan and Germany to become the third-largest by 2030, S&P Global Market Intelligence said in its latest issue of PMI.
Currently the Asia's third largest economy with a GDP of $3.5 trillion in 2022, India will become the second largest in the continent if it overtakes Japan. India is the fastest-growing major economy this fiscal year with the GDP expected to grow around 6.3 per cent by March 2024.
The country is likely to have a GDP of $7.3 million at the end of this decade, S&P Global said. "This rapid pace of economic expansion would result in the size of the Indian GDP exceeding Japanese GDP by 2030, making India the second largest economy in the Asia-Pacific region," it added.
The report listed a few key growth drivers that supported the long-term outlook for the country's economy. "An important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. The rapidly growing Indian domestic consumer market as well as its large industrial sector have made India an increasingly important investment destination for a wide range of multinationals in many sectors, including manufacturing, infrastructure and services," it said.
After two years of rapid economic growth in 2021 and 2022, the Indian economy has performed remarkably in 2023 with a 7.8 per cent growth in the April-June quarter.
By 2022, the size of the Indian GDP had already become larger than British and French GDP. By 2030, India's GDP is also predicted to surpass Germany.
The US, which is the largest economy, makes up for a quarter of the world's GDP at $25.5 trillion. It is followed by China ($18 trillion GDP), Japan (S4.2 trillion GDP) and Germany ($4 trillion GDP).
The country's digital transformation is drawing major global technology and e-commerce firms to the Indian market, said S&P Global. "The rapid growth of e-commerce and the shift to 4G and 5G smartphone technology will boost home-grown unicorns like online e-commerce platform Mensa Brands, logistics startup Delhivery and the fast-growing online grocer BigBasket, whose e-sales have surged during the pandemic,” it added.
The increase of foreign direct investment inflows into India over the past five years also looks promising. "India's strong FDI inflows have been boosted by large inflows of investments from global technology MNCs such as Google and Facebook that are attracted to India's large, fast-growing domestic consumer market, as well as a strong upturn in foreign direct investment inflows from manufacturing firms," it said.