- India's economy is on track to surpass the US and become the world's second-largest by 2075, Goldman Sachs forecasts.
- Key drivers of the South Asian nation's growth include its technological advances and a large population.
India's economy is on track to surpass the US by 2075 to become the world's second-largest after China, according to Goldman Sachs.
The Wall Street bank projects the South Asian nation's GDP surging to $52.5 trillion by then, compared with forecasts of $57 trillion and $51.5 trillion for China and the US, respectively. India's growth will be powered mainly by its large labor force, advances in technology and rising capital investment, the bank said in a note.
At present, India is ranked the fifth-biggest economy in the world with a GDP of $3.74 billion and a per capita income of $2,600, according to the International Monetary Fund.
High-profile market experts like Ray Dalio and Mark Mobius have hailed the Asian nation as the next biggest investing opportunity. Even major companies including Apple, Tesla and SpaceX have leaned into the emerging economy as a hub for its supply chains instead of China.
'Innovation and technology'
"India has made more progress in innovation and technology than some may realize," Santanu Sengupta, Goldman Sachs's chief India economist, said. "Innovation and increasing worker productivity are going to be important for the world's fifth-biggest economy. In technical terms, that means greater output for each unit of labor and capital in India's economy," he added.
But India also faces hurdles in its journey toward economic superpower status. These include hefty import taxes, bureaucracy and red tape, and the dominance of domestic business tycoons – which make it harder for foreign companies to snap up any market share in key industries.
Capital investments
According to Goldman's Sengupta, capital investment, which refers to money invested in a business for its long-term growth, is going to be a key engineer of India's growth moving forward.
"Driven by favorable demographics, India's savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment," he said.
India's Prime Minister Narendra Modi has been a cheerleader for capital expenditure, recently urging the nation's private sector to boost investment and take advantage of the nation's 2023-24 budget, per the Hindu newspaper.
Ballooning population
Lastly, India has the opportunity to turbocharge its GDP by integrating its growing population into the labor force. The South Asian nation recently overtook China to become the world's most populous, with 1.4 billion people.
"India's large population is clearly an opportunity, however the challenge is productively using the labor force, by increasing the labor force participation rate. That will mean creating the opportunities for this labor force to get absorbed and simultaneously training and upskilling the labor force," Sengupta said.