By Spy Uganda
According to a report by Goldman Sachs Research, India is expected to overtake the US and become the world’s second-largest economy by 2075.
As of now, India holds the position of the world’s fifth-largest economy, following Germany, Japan, China, and the United States.
India’s population of 1.4 billion, which is already said to be the largest in the world, is set to be a key driver behind the country’s economic growth in coming years.
However, to harness the potential of its growing population, India needs to focus on increasing labor force participation and providing training and skills to its talented workforce, said Santanu Sengupta, Goldman Sachs Research’s India economist.
The report highlights the significance of innovation and increasing worker productivity, which will contribute to greater output per unit of labor and capital. Capital investment is another crucial driver, as India’s savings rate is expected to rise with falling dependency ratios, increasing incomes, and a more developed financial sector. Sengupta believes the conditions are favorable for a private sector capital expenditure cycle, given the healthy balance sheets of private corporates and banks in India.
Favorable demographics, including a large and relatively young population, will also contribute to India’s potential growth. Sengupta thinks that India will have one of the lowest dependency ratios among large economies over the next 20 years.
“So that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, continuing the growth of infrastructure,” Sengupta said.
However, effectively utilizing the labor force and increasing labor force participation rate are key challenges that require creating opportunities for employment and investing in training and upskilling.
Sengupta also discusses some key risks for India’s economic growth. One major downside risk is if the labor force participation rate fails to increase, especially among women. Upside growth potential can come from higher productivity resulting from digitalization, wider Internet penetration, and the implementation of the Aadhaar system, which facilitates public service delivery, expands credit availability, and improves productivity.