India will Surpass the US Economy by 2075

India is on pace to pass the US on the list of the world’s biggest economies — but there’s a looming chance it squanders this promise

Cork Gaines 
Jul 14, 2023, 12:13 PM EDT

• India is expected to be the world’s second-largest economy by 2075.
• Challenges include red tape, high tariffs, and discouraging foreign investment.
• Strengthening ties with China could boost growth, but political issues could derail the move.

India is on pace to pass the US on the list of the world’s largest economies, according to Goldman Sachs, But as the South Asian giant moves towards economic superpower status, it must first overcome some looming obstacles.

According to a recent Goldman report, India’s economy is projected to top America’s around 2075, becoming the second-largest in the world. The economists estimate that China will have already moved past the US by that time.

India’s economic growth is fueled by several key factors, including its vast labor force, technological advances, and burgeoning capital investment. As our own Zahra Tayeb recently noted, market experts have “hailed the Asian nation as the next biggest investing opportunity,” having expressed bullish sentiments about India’s prospects, echoing the corporate interests of tech giants Apple, Tesla, and SpaceX.

A significant driver of this growth is innovation and technology, as noted by Goldman Sachs’s chief India economist, Santanu Sengupta.

“India has made more progress in innovation and technology than some may realize,” Sengupta said. “Innovation and increasing worker productivity are going to be important for the world’s fifth-biggest economy. In technical terms, that means greater output for each unit of labor and capital in India’s economy.”

However, India’s journey is not without challenges. The Goldman Sachs team noted that the biggest risk facing the country is if the labor force participation rate does not reverse its current 15-year downward trend.

“If you have more opportunities — especially for women, because the women’s labor force participation rate is significantly lower than men’s — you can shore up your labor force participation rate, which can further increase your potential growth.” the Goldman team wrote.

And as our Huileng Tan noted, foreign investors, including Elon Musk, are struggling to c---k the market thanks to red tape, high tariffs, powerful tycoons, and a national push for self-reliance. Apple is another company that has struggled to enter the Indian market as it hopes to rely less on China as its primary chipmaker. These factors are already acting as barriers and could slow the influx of capital and future growth of their economy.

India also has an opportunity to strengthen their economic ties with China. Both sides could take advantage of “nearshoring,” a practice in which countries bring supply chains for crucial goods to countries that are close physically and politically, much like the US has done with Mexico. These Asian powerhouses can leverage proximity, reduce t---s-Pacific shipping costs, and create a more effective regional trade network. 

Forging such an alliance would come with serious challenges: the two countries have a history of conflict over their shared border, and India has shown a general wariness of China’s rising military power. While there are serious political challenges, a stronger collaboration could fuel growth and influence the future of regional economics in a post-pandemic world. But there is still a lot of work to do.

Source: Business Insider

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India’s economy will surpass the US in size by 2075, thanks to its tech scene and growing population, Goldman Sachs says

Zahra Tayeb 
Jul 10, 2023, 9:09 AM EDT

• India’s economy is on track to surpass the US and become the world’s second-largest by 2075, Goldman Sachs forecasts. 
• Key drivers of the South Asian nation’s growth include its technological advances and a large population. 
• But high import taxes and red tape, among other factors, stand in the way of the country’s future success. 

India’s economy is on track to surpass the US by 2075 to become the world’s second-largest after China, according to Goldman Sachs.

The Wall Street bank projects the South Asian nation’s GDP surging to $52.5 trillion by then, compared with forecasts of $57 trillion and $51.5 trillion for China and the US, respectively. India’s growth will be powered mainly by its large labor force, advances in technology and rising capital investment, the bank said in a note.

At present, India is ranked the fifth-biggest economy in the world with a GDP of $3.74 billion and a per capita income of $2,600, according to the International Monetary Fund. 

High-profile market experts like Ray Dalio and Mark Mobius have hailed the Asian nation as the next biggest investing opportunity. Even major companies including Apple, Tesla and SpaceX have leaned into the emerging economy as a hub for its supply chains instead of China.

‘Innovation and technology’

“India has made more progress in innovation and technology than some may realize,” Santanu Sengupta, Goldman Sachs’s chief India economist, said. “Innovation and increasing worker productivity are going to be important for the world’s fifth-biggest economy. In technical terms, that means greater output for each unit of labor and capital in India’s economy,” he added.

But India also faces hurdles in its journey toward economic superpower status. These include hefty import taxes, bureaucracy and red tape, and the dominance of domestic business tycoons – which make it harder for foreign companies to snap up any market share in key industries. 

Capital investments 

According to Goldman’s Sengupta, capital investment, which refers to money invested in a business for its long-term growth, is going to be a key engineer of India’s growth moving forward. 

“Driven by favorable demographics, India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment,” he said. 

India’s Prime Minister Narendra Modi has been a cheerleader for capital expenditure, recently urging the nation’s private sector to boost investment and take advantage of the nation’s 2023-24 budget, per the Hindu newspaper. 

Ballooning population 

Lastly, India has the opportunity to turbocharge its GDP by integrating its growing population into the labor force. The South Asian nation recently overtook China to become the world’s most populous, with 1.4 billion people. 

“India’s large population is clearly an opportunity, however the challenge is productively using the labor force, by increasing the labor force participation rate. That will mean creating the opportunities for this labor force to get absorbed and simultaneously training and upskilling the labor force,” Sengupta said.

Source: Markets Insider

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