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India gears up to overtake Japan in 2027 as world's 3rd largest economy

The looming global recession and the fast-dropping growth rates of Japan and Germany - currently the third and fourth largest economies in the world - are key factors helping the world's fastest growing major economy to realise its goal sooner than estimated by economists and analysts

Published: Wed 19 Oct 2022, 4:37 PM

Updated: Thu 19 Oct 2023, 11:15 AM

By
Issac John

India will become a $30 trillion economy with 25 per cent share in exports by 2047. — File photo

India is poised to become the world’s third biggest economy in next five years, after the United States and China, a dream target to be achieved by default two years earlier than initially hoped for by the South Asian economy.

The looming global recession and the fast-dropping growth rates of Japan and Germany — currently the third and fourth largest economies in the world — are key factors helping the world's fastest growing major economy to realise its goal sooner than estimated by economists and analysts.

The database of International Monetary Fund's recent World Economic Outlook shows that India, at present the fifth largest global economic powerhouse after overtaking the UK just recently, will remain a powerful global growth engine notwithstanding the headwinds of inflationary recession or stagflation that is feared to wreak havoc across some of the leading economies in world through 2023 and 2024.

In its October World Economic Outlook, the IMF has slashed India's GDP forecast to 6.8 per cent in 2022, from 7.4 per cent predicted in July and 8.2 per cent predicted in January this year. Between April 2021 and March 2022, India had grown at 8.7 per cent. The IMF has lowered its projection for Japan to 1.6 per cent while Germany’s GDP growth is expected at 1.2 per cent in 2022 and 0.8 per cent in 2023.

India is growing faster than other nations in the G20 except for Saudi Arabia. In 2023-24, according to the IMF, India’s GDP is likely to grow 6.1 per cent, the highest in the G20.

In tandem with the GDP growth, the per capita GDP of India, which is about to overtake China as the world’s most populous nation, is also on track to reach $3,652 in 2027 as compared to $2,466 in 2022.

India’s Finance Minister Nirmala Sitharaman has said that the Indian rupee is holding ground at a time when the dollar has strengthened.

“The fundamentals of the Indian economy are good, macroeconomic fundamentals are good. The foreign exchange reserve is good. This is what I keep repeating that inflation is also at a manageable level,” said the minister.

Turbo-charging India’s growth in the coming years will be an estimated exponential growth in merchandise and services exports.

Commerce and Industry Minister Piyush Goyal has expressed confidence that the country would achieve an ambitious $2-trillion export target for goods and services by 2030.

Speaking on Sunday at the Exporters’ Conclave held at Chennai, Goyal said India will become a $30 trillion economy with 25 per cent share in exports by 2047.

Data released by India’s commerce industry shows that merchandise exports rose by 4.82 per cent to $35.45 billion. During April-September 2022, exports recorded a growth of 16.96 per cent to $231.88 billion.

A Sakthivel, president of Federation of Indian Exports Organisations, said Indian exporters have good opportunities for exports to Russia and the EU despite recessionary trends visible there. There would be about $8 to $10 billion additional exports to Russia in the next 12 months and $15 to $20 billion to the EU.

The IMF's report said that though inflation in India is high but is not skyrocketing like elsewhere in the EU and the US. Inflation rate rose to a 5-month high of 7.4 per cent in September. India’s current account deficit is high but expected to moderate while forex reserves stand comfortably at nearly $550 billion. The banking sector is also in a strong position and the credit cycle is picking up.

The Reserve Bank of India, which has kept a steady hand on monetary policy, said in its quarterly bank lending survey released on September 30 that bankers are confident about higher loan demand, and easier loan terms over the next two quarters. As this comes on the back of rising interest rates, it shows higher investment and consumption demand from the corporate, and household sectors. This trend is matched by the bullishness reported in the RBI’s latest consumer confidence survey. The RBI has raised the repo rate four consecutive times since May in order to tame inflation.