Sarah Travers
Projections from investment banking firm Jefferies indicate that India is on the cusp of claiming the title of the world’s third-largest economy by 2027, surpassing stalwarts Japan and Germany. This forecast is backed by compelling data showcasing India’s remarkable rise from the ninth-largest global economy merely a decade ago to its current standing as the fifth-largest, boasting a nominal GDP of $3.4 trillion.
Jefferies anticipates India’s GDP to soar to $5 trillion within the next four years, with a ambitious target nearing $10 trillion by 2030. Such exponential growth is underpinned by an expected annual GDP growth rate of 6% over the next five years, outpacing the majority of major economies worldwide. Furthermore, Indian equity markets are forecasted to experience substantial growth, potentially yielding dollar-term returns of up to 10% over the next five to seven years.
Several key factors contribute to India’s favorable economic outlook, including robust domestic structural flows and the prospect of significant unicorn listings. The economic reforms spearheaded under the leadership of Prime Minister Narendra Modi have been pivotal in propelling India’s economic trajectory. Particularly noteworthy are the implementations of the Goods and Services Tax (GST) and the enactment of new bankruptcy laws, which have not only enhanced India’s macroeconomic landscape but also bolstered stability, rendering the nation increasingly attractive to global investors.
The ‘Make in India’ initiative, inaugurated in September 2014, has played a pivotal role in stimulating investment, fostering innovation, and advancing skill development. Now in its second phase (‘Make in India 2.0’), the initiative focuses on fostering an investment-friendly environment, modernizing infrastructure, and liberalizing new sectors for foreign direct investment (FDI). This strategic pivot toward private-led growth signifies the maturation of India’s market economy and a growing confidence in the private sector’s capacity to drive sustainable development and innovation.
India has witnessed a substantial surge in FDI, with the financial year 2021-2022 recording its highest-ever annual FDI inflow of $84.8 billion. This marks a significant increase from $45.15 billion in 2014-2015 and a remarkable leap from $2.2 billion two decades prior in 1999-2000. Multinational corporations are poised to further diversify their operations by investing in burgeoning Indian sectors such as technology, manufacturing, and services, potentially reshaping the global economic landscape.
The ascent of India’s economy heralds the dawn of a multipolar economic world order characterized by both collaboration and competition. Accordingly, leadership and strategies must adapt to accommodate India’s burgeoning economic influence. Corporations and governments alike must prioritize understanding India’s market dynamics, regulatory framework, and cultural intricacies to effectively engage and collaborate.
The strategic ramifications extend beyond India’s borders, presenting opportunities for heightened regional collaboration and economic diplomacy. Those who anticipate and embrace India’s ascent are poised to thrive in the evolving global economic landscape. As India continues its journey toward establishing itself as a global economic powerhouse, the world eagerly awaits the unfolding of this transformative narrative.
