India is on track to become the world’s third-largest economy by 2030, but its rising population poses significant challenges in ensuring basic services and meeting growing investment demands, according to a report by S&P Global Ratings released on Thursday.
The report highlights India's ambitious economic goals, with the country aiming to expand its economy to $30 trillion by 2047, up from its current size of $3.6 trillion. India is currently the fifth-largest economy globally.
“India is set to be the fastest-growing major economy over the next three years, and will rank third globally by 2030,” S&P said. The report also pointed to India's upcoming entry into JP Morgan’s Government Emerging Market Bond Index in 2024, which could unlock substantial government funding and resources in domestic capital markets. However, investors will be seeking improvements in market access and settlement processes, it added.
The report, titled Look Forward Emerging Markets: A Decisive Decade, forecasts a pivotal role for emerging markets, projecting an average GDP growth of 4.06 per cent for these economies through 2035, compared to just 1.59 per cent for advanced economies. By 2035, emerging markets are expected to drive 65 per cent of global economic growth, with Asia-Pacific countries — India, China, Vietnam, and the Philippines — leading the way.
S&P also noted that by 2035, India will solidify its position as the third-largest economy, with Indonesia and Brazil ranking eighth and ninth, respectively.
The report stated that while India has made strides in boosting capital expenditure to improve its fiscal flexibility, it will face mounting challenges as its population continues to grow. India is projected to have the world’s largest population by 2035, straining its ability to cover basic services and sustain productivity levels.
As emerging markets chart their economic future, S&P stressed the importance of governments adopting and executing long-term growth strategies. "Setting ambitious growth targets provides a clear roadmap for progress, signaling that policymakers are preparing for the future by addressing vulnerabilities and mobilizing capital," the report concluded.