India is set to become the third largest economy and transition to the upper-middle-income category by 2030-31, driven by a projected annual growth rate of 6.7 per cent this fiscal, said a report by S&P Global on Thursday. While India posted GDP growth of 8.2 per cent in FY2024, exceeding the government’s earlier estimate of 7.3 per cent, sustained reforms are crucial for India’s economic momentum to continue. In the first edition of “India Forward: Emerging Perspectives”, S&P Global said that India needs continued reforms directed towards improving business transactions and logistics, boosting private sector investment, and reducing reliance on public capital.
Abhishek Tomar, Head- S&P Global India Leadership Council and Chief Data Officer for S&P Global Market Intelligence, said, “India’s medium-term prospects are healthy and filled with opportunities in multiple sectors including trade, agriculture, and AI, likely structural reforms and growing energy demands. India is poised for growth, and with a young and dynamic workforce well-positioned to shape the global economic landscape.”
S&P Global also forecasted a dynamic and competitive Indian equity market, bolstered by strong growth prospects and improved regulation. Indian government bonds have attracted sizable foreign portfolio inflows, in absolute terms, since the 2023 announcement of India’s inclusion in major emerging market indexes. The report said that equity markets are expected to stay dynamic and competitive due to strong growth prospects and better regulation.
While high food price inflation in the face of climate change could constrain monetary policy, making investment more expensive, S&P Global said, enhancing climate risk adaptation and mitigation policies and infrastructure to de-risk agriculture are imperative for the smooth conduct of monetary policy.
Further, S&P Global also said that leveraging India’s long coastline will drive geopolitical and economic opportunities for the country. For India to maximize benefits from its long coastline, the report said, it requires suitable investment, trade and geopolitical strategies. As geopolitical competition increases in the Indian Ocean region, India should look beyond domestic ports and develop a regional network of strategically vital ports.
In terms of energy security, affordability and sustainability, S&P Global said that India faces growing domestic energy demand, has a heavy reliance on energy imports and requires more aggressive investment in new, sustainable technologies.
The S&P Global report also emphasized that advancements in agriculture will rely on new technologies and policies to enhance infrastructure and productivity. Addressing critical issues such as irrigation, storage, and supply distribution is paramount for ensuring food security and economic stability. The agriculture sector is a major focus for the government, with its share in nominal GDP at 18 per cent, according to S&P Global Market Intelligence.
Furthermore, the use of AI can play a key role in accelerating India’s economic growth as the country aspires to be the third-largest economy in the world by FY31. India can aim to replicate the success of the digital public infrastructure public-private partnership model that helped accelerate the country’s digitalization.
Strong growth momentum
India’s goods and services tax (GST) collections reached at an all-time monthly high of Rs 2.1 trillion in April and remained healthy in May and June. Further, the country posted strong HSBC India Purchasing Managers’ Index (PMI) readings so far in fiscal 2024-25 and manufacturing and services sector activity continued to trend well above the neutral mark of 50. S&P Global said that the India Composite PMI Output Index reached one of the highest levels in nearly 14 years, supported by favourable economic conditions, strong demand, capacity expansion, increased new work intake and productivity gains.
Also, there has been an increase in new export orders for goods and services, complementing buoyant domestic demand in India and driving expansion in total sales and business activity. Qualitative data from the PMI surveys also reveals new business gains for manufacturers and service providers globally.
S&P Global expects India’s real GDP to grow 6.8 per cent in the current fiscal year, moderating from a high base in fiscal 2023-24.
