Goldman Sachs predicts that India will become the world’s second-largest economy by 2075, surpassing countries like Japan, Germany, and the US, due to its large population and strong GDP growth.
Goldman Sachs Statement
In a recent report by Goldman Sachs, it is predicted that India will become the second-largest economy globally by 2075. This growth will surpass countries like Japan, Germany, and even the United States. The report emphasizes the significant role of India’s projected largest population in the world and forecasts a remarkable expansion in its GDP. Currently, India holds the fifth position in terms of global economic rankings, following Germany, Japan, China, and the United States.
What are the Reasons for surpassing?
The following reasons are:
Dependency Ratio:
Research predicts India will have a low dependency ratio compared to regional economies in the coming decades.. This means that India will have a relatively smaller proportion of non-working individuals compared to other countries. Sengupta stressed the importance of boosting workforce participation, training, and utilizing India’s abundant talent pool for growth. He also highlighted that this period presents an opportunity for India to focus on areas like manufacturing capacity, service sector growth, and infrastructure development. The report further emphasized the importance of innovation and improving worker productivity for India, which currently holds the position of the world’s fifth-largest economy.
Capital Investment:
Capital investment will drive India’s future economic growth. Favorable demographics, lower dependency ratios, rising incomes, and a growing financial sector will drive an increase in India’s savings rate. The report acknowledges government initiatives and highlights the private sector’s readiness for a capital expenditure cycle.With healthy balance sheets among private corporations and banks in India, the conditions are favorable for increased private sector investments in the country’s economy.
Drawbacks
Although it is a drawback, if handled rightly, it can help in surpassing
Labor Force Participation Rate
The report highlighted a key risk to India’s economic growth, which is the possibility of the labor force participation rate not increasing. Over the past 15 years, the labor force participation rate in India has declined. The report emphasized the importance of creating more opportunities, particularly for women, as their labor force participation rate is significantly lower than that of men. By increasing the labor force participation rate, India can strengthen its potential for growth and tap into greater economic potential.
Export Rate
India’s economic growth has been impacted by net exports, resulting in a current account deficit, as noted in the report. However, it also highlighted that service exports have played a role in mitigating the impact on the current account balance.India’s economy relies primarily on domestic demand, distinguishing it from other economies in the region that heavily depend on exports. The report attributes around 60% of India’s growth to domestic consumption and investment.
To sum up
To summarize, India is projected to become the world’s second-largest economy by 2075, surpassing countries like Japan, Germany, and the US, according to Goldman Sachs. The report highlights India’s large population and economic potential as key drivers. To maximize growth, it is important to increase workforce participation, provide training and skills development, and attract investment. India’s low dependency ratio and favorable demographics create opportunities for private sector growth and capital investment. However, labor force participation must increase to sustain economic growth. Services exports have helped balance the current account deficit, and domestic consumption and investment are significant drivers of India’s economy.
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