India To Become World's Second Largest Economy By 2075, Says Goldman Sachs
Risks include relatively lower net exports and fluctuations in commodity prices, says Goldman Sachs Research’s India economist.
India will have the world’s second-largest economy by 2075, aided by capital investment and favourable demographics, according to Goldman Sachs Research’s India economist, Santanu Sengupta.
He expects the Indian economy to surpass the U.S. with a GDP projection of $52.5 trillion, trailing only China's $57 trillion, Sengupta said in an article on Goldman Sachs' website.
For India, a key to realising the potential of that growing population is boosting participation within its labour force as well as providing training and skills for its immense pool of talent, Sengupta said.
"Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies," he said. According to Sengupta, the country has the "best ratio" between its working-age population and its number of children and elderly.
"So that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, and continuing the growth of infrastructure."
Increasing worker productivity will translate into greater output for each unit of labour, he said.
Growing capital investment will also help in achieving this feat. Driven by favourable demographics, India’s savings rate is likely to increase with falling dependency ratios, rising income, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment, Sengupta said.
However, downside risks include relatively lower net exports and fluctuations in commodity prices. "It’s a very domestic-demand-driven economy compared to many others, especially in the region, which is more export-dependent," Sengupta said.
The country's growth until now has been mainly driven by domestic consumption as the main driver—around 55–60% of the overall economy plus domestic investments, he said.
Moreover, as India imports most of the commodities, price fluctuations, such as volatility in energy prices due to global macro factors, remain a risk.
Even as the Indian government aims to reach net zero emissions by 2070, transitioning to green energy is a "large investment opportunity, but it’ll take time, and in the interim, fossil fuels are going to be the majority share of energy needs until India transitions to green energy".
