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India is on track to add $1tr to GDP every 18 months till 2030

Rapid growth will make it the third-largest economy in 2030, report says

Published: Tue 24 Sep 2024, 6:39 PM

Updated: Tue 24 Sep 2024, 6:40 PM

By
Issac John

Employees at a factory in the eastern Indian state of West Bengal. — Reuters file

India, the fastest-growing major global economy, is on track to add $1 trillion to its GDP every 1.5 years over the next six years, making it the third-largest economy in 2030, according to an IDBI Capital report.

The report suggests that India will become a $10 trillion economy by 2032, more than doubling its current GDP size of $4 trillion. The report highlights that the manufacturing sector will play a major role in driving this accelerated growth.

The upbeat IDBI forecast comes amid a stark warning issued by Moody’s that the third-largest Asian economy’s debt to GDP ratio could reach closer to 100 per cent if the government attempts to fill the annual 3.4 per cent of GDP gap in climate mitigation and adaptation until 2030.

Moody’s Ratings said in a report released in September 2023 that if India were to fill the climate mitigation and adaptation gap by 2030, it would spend more than comparable economies, barring South Africa and Brazil. S&P Global Ratings on Tuesday maintained India's growth forecast at 6.8 per cent while noting that the Reserve Bank of India (RBI) may cut interest rates in October. In its economic outlook for the Asia-Pacific region, S&P also retained its gross domestic product (GDP) growth forecast for 2025-26 (FY26) at 6.9 per cent. It noted that India’s strong growth would help the RBI manage inflation.

IDBI Capital noted that India’s buoyant manufacturing will contribute 32 per cent to the incremental Gross Value Added (GVA).

The data in the report also highlights the remarkable acceleration of India's economic growth in recent years. While it took the country 63 years, from 1947 to 2010, to reach a GDP of $1 trillion, it reached $2 trillion in 2017, just seven years after reaching the first trillion, and $3 trillion in 2020. Although the Covid-19 pandemic slightly slowed growth, extending the time to reach $4 trillion by the end of 2024, the report suggests that India is now poised for exponential growth in the coming years.

According to the report, India is projected to reach a GDP of $10 trillion between 2024 and 2032. This growth will be fuelled by robust manufacturing demand, export potential, and supportive government policies, including Production Linked Incentive (PLI) schemes.

The report also forecasts that India will surpass major global economies such as the US, China, Germany, South Korea, and Japan in terms of the Industrial Production Index (IIP). "India to overtake top 5 economies in manufacturing IIP ...US, China, Germany, South Korea and Japan... India has the potential to grow on similar lines supported by policy reforms and favourable business climate," the report stated. India's export potential is expected to increase significantly, with exports projected to contribute 25 per cent of GDP by 2030, amounting to $2 trillion.

The report highlighted several key factors driving India's manufacturing and export growth, including rising domestic demand due to increasing disposable incomes, global realignment of supply chains, high export potential, and a supportive financial ecosystem.