India to contribute over 16% of global GDP growth in 2023

RBI Governor says economic expansion may surpass 7% this year

Issac John

Published: Mon 5 Jun 2023, 4:10 PM

The Indian economy, the world’s fifth-largest, has just crossed $3.5 trillion, and will remain the fastest-growing G-20 economy over the next few years as the nation emerges as the most populous on the planet, outpacing China.

Coincidentally, Germany, the world’s fourth-largest economy, slipped into a recession with a 0.3 per cent contraction of its gross domestic product during January–March 2023 while the US, the world’s largest economic power, grew 1.1 per cent. As China’s GDP rose 4.5 per cent and the Japanese economy expanded by 1.6 per cent, India’s GDP grew 6.1 per cent (compared to 4.0 per cent in the same quarter of 2021–22), to claim the title as the fastest growing among the world’s top economic powers,

As the most consistent global growth engine, the South Asian economic giant is also on track to contribute over 16 per cent of the global GDP growth over 2023-24. India’s population, at 1.4286 billion, one-sixth of the world’s total inhabitants or 16.6 per cent, just surpassed China’s at 1.4257 billion, as per the demographic data released by the UN Population Fund.

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In line with the prediction made by some eminent economists that India will be regaining its glory as the global economic powerhouse along with China, the country is getting closer to reaching a 22-23 per cent share of the global economy it accounted for more than 300 years ago.

“Now we are the fifth-largest economy. By 2027-28, we will be the third-largest economy in the world. India is a $3.5-trillion economy today and will become a $30-35 trillion economy by 2047 when we celebrate 100 years of independence," India’s Minister of Commerce & Industry Piyush Goyal said.

Reserve Bank of India Governor Shaktikanta Das has said it would not be surprising if India's growth surpasses 7 per cent this year. Key global agencies including the International Monetary Fund, the World Bank, and a host of rating agencies have predicted India to become the fastest-growing economy in the ongoing financial year, even as major economies continue to shrink under the pressure of a global economic slowdown.

IMF managing director Kristalina Georgieva has said India continues to remain a relative "bright spot" in the world economy, and will alone contribute 15 per cent of the global growth in 2023.

According to Morgan Stanley, India is benefiting from a combination of cyclical and structural tailwinds. "In recent months, a wide variety of indicators suggest that India's recovery is strong and broad-based, and is well-placed to sustain growth rates of above 6.0 per cent," the US bank said in a report. "Three megatrends — global offshoring, digitalisation, and energy transition — are setting the scene for unprecedented economic growth in the country of more than one billion people," it said.

Ridham Desai, Morgan Stanley's chief equity strategist for India, noted in the report that India is gaining power in the world order. India's GDP could more than double from $3.5 trillion today to surpass $7.5 trillion by 2031, positioning it as the world’s third-largest economy. Its share of global exports could also double over that period, while the Bombay Stock Exchange (BSE) could deliver 11 per cent annual growth, reaching a market capitalisation of $10 trillion in the coming decade," said the report titled 'India's Impending Economic Boom'.

India is also poised to become the factory of the world, Morgan Stanley said, adding that a spate of factors such as corporate tax cuts, investment incentives, and infrastructure spending are helping drive capital investments in manufacturing. India's income distribution could flip over the next decade, and consequently overall consumption in the country could more than double from $2 trillion in 2022 to $4.9 trillion by the end of the decade.

According to a UN report, India’s economy is expected to grow by 6.7 per cent in the calendar year 2024, supported by resilient domestic demand. India's official estimate for the current financial year ending March 2024 is for a 6.5 per cent growth.

Moody's said India is expected to contribute 16 per cent of the global GDP growth over 2023-24. But the rating agency warned that reform and policy barriers could hamper investment. In a research report, the US-based rating agency said bureaucracy could slow approval processes in obtaining licences and setting up businesses, prolonging project gestation.