India Can Become $6.7 Trillion Economy By 2031, Expected To Grow By 6.7%: S&P Global

S&P Global report said, "We expect India to grow 6.7% per year from fiscal 2024 to fiscal 2031, catapulting GDP to $6.7 trillion from $3.4 trillion in fiscal 2023."

According to the report, capital is projected to be the most substantial contributor, accounting for 53 per cent of India's 6.7 per cent average GDP growth throughout the decade. ( Image Source :Getty )

S&P Global expects the Indian economy to grow at a 6.7 per cent annual growth rate from fiscal 2024 to fiscal 2031, propelling the GDP to $6.7 trillion from $3.4 trillion in fiscal 2023. In a report on Thursday, the US-based credit ratings agency also said that this growth trajectory is expected to raise per capita GDP to approximately $4,500. However, it also noted that a global slowdown and lagged effect of a policy rate hike by RBI could slow down growth to 6 per cent in the current fiscal year. 

S&P Global report titled 'Look Forward: India's Money' said, " We expect India to grow 6.7% per year from fiscal 2024 to fiscal 2031, catapulting GDP to $6.7 trillion from $3.4 trillion in fiscal 2023. Per capita GDP will rise to about $4,500."

"Capital accumulation will be the dominant driver of Indian growth. Investment as a proportion of GDP reached a 10-year high of 34% in fiscal 2023. The government has played a key role in boosting investment by offering substantial support for infrastructure projects and by incentivizing manufacturing. We expect the Indian private sector to gradually increase investments given healthy corporate balance sheets," the report further added. 

According to the report, capital is projected to be the most substantial contributor, accounting for 53 per cent of India's 6.7 per cent average GDP growth throughout the decade. This outshines the 17 per cent contribution from labor. Additionally, increases in productivity are expected to drive 30 per cent of the country's GDP growth.

India clocked a 7.2 per cent GDP growth in the fiscal year 2022-23. 

The report jointly authored by S&P Global Ratings Global Chief Economist Paul Gruenwald, Crisil Chief Economist Dharmakirti Joshi, and S&P Global Market Intelligence Chief Economist Asia Pacific Rajiv Biswas also said that the macro challenge in the upcoming decade is to turn traditionally uneven growth into a high and stable trend.

"You will see growth peak at around fiscal 2025-26," Joshi said.

The report highlighted that India stands to benefit from reforms such as Goods and Services Tax (GST), and the implementation of the Insolvency and Bankruptcy Code is expected to foster a healthy credit culture. Despite the recalibration towards manufacturing, services will continue to play a vital role in the economy.

Over the next decade and beyond, the challenge lies in creating conditions for sustained growth, which necessitates structural reforms in three key areas: increasing labor participation, especially among women, enhancing skills, boosting private investment in manufacturing, and bolstering external competitiveness through foreign direct investment (FDI), the report said.