Key Takeaways
India will be the fastest growing major economy in 2023
and is set to become the fourth largest economy in the
world in the 2030s, buoyed by its favourable
demographics and dynamic service sector.
While we see downside risks from demographics for most
economies’ long-run growth paths, India could outperform
our expectations given its scope to increase labour force
participation, its increasingly educated workforce, high
investment needs, large share of workers still in
agriculture and the potential to benefit from shifting global
supply chains.
However, to truly become the next Asian tiger economy,
India needs to accelerate the share of its workforce
entering productive areas of the economy, namely
industry and services.
For this to occur, more reforms will be needed to
encourage private sector investment and reduce
operational costs, while physical infrastructure will also
need to improve to reduce the costs of doing business.
However, we see challenges pushing through major
reforms – particularly of the agricultural sector - while a
tendency towards protectionism may cap the pace of
manufacturing growth.
Overall, India is primed to impress – our growth forecast
is consistent with it becoming one of the major engines of
global growth. But, without significant reforms, or a more
meaningful acceleration in sectoral reallocation, it will
likely fall short of the dynamism seen in the Asian tigers
who attained advanced economy status in record time.