New Delhi: Investment bank Goldman Sachs has said that India is poised to become the world’s second-largest economy by 2075, surpassing Japan, Germany and the United States. The recent report states that favourable demographics, innovation and technology, higher capital investment and rising worker productivity will drive India’s growth. Currently, India is ranked the world’s fifth-largest economy, trailing Germany, Japan, China and the US.
“Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies,” Goldman Sachs Research’s India economist, Santanu Sengupta was quoted as saying.
According to Gupta, India has made more progress in innovation and technology than some may realise. Yes, the country has demographics on its side, but that’s not going to be the only driver of GDP. 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 labour and capital in India’s economy.
The report highlighted the Indian government’s focus on infrastructure development in terms of roads, railways and other metrics may very well drive the growth locomotive. It argued that the time was ripe for the private sector to take the plunge and create capacity in manufacturing and services in order to generate more jobs and absorb the large labour force.
The only concern that may stall India’s growth would be if the labour force participation rate does not increase as projected, the report states.
“The labour force participation rate in India has declined over the last 15 years,” it noted, adding, “If you have more opportunities – especially for women because the women’s labour force participation rate is significantly lower than men’s – you can shore up your labour force participation rate, which can further increase your potential growth.” Net exports have also had a negative impact on India’s growth but the report took an optimistic view and said the service exports had been cushioning current account balances.
According to a Time magazine report, nearly half the population of India (650 million people) is below the age of 25 – meaning the country won’t be hitting its peak until 2065. Adults aged 65 and older comprise only seven per cent of the population compared with 14 per cent in China and 18 per cent in the US. The share of Indians who are 65 and older is likely to remain under 20 per cent until 2063 and will not approach 30 per cent until 2100, under the UN’s medium variant projections.
The Goldman report is batting for this demography to come good which may propel India beyond the US, one of the biggest superpowers of the century gone by.