India’s economy is expected to grow by an average rate of 6.7% from 2025 to 2040, outpacing China’s 3% average real GDP expansion in the same period, Singapore-based DBS Bank said in a report on Thursday.
During the period, India’s nominal GDP (rupee basis) is expected to average 9.7%.
“We also draw out a ‘bull case’ where growth could average a sharper 7.3-7.5% in the same period,” it said.
If the base case growth projections come to fruition, DBS expect India’s nominal GDP economy to pass the $5.6 trillion mark by 2030 and near $11.5trn by 2040.
Per capita income is on course to beat $3,700 within this decade and rise to $7,000 by 2040, firmly into the upper middle income country threshold, it said. These are likely to be key milestones ahead of the ‘Viksit Bharat’ goalposts set by the government.
Demographics and labour availability are crucial catalysts to sustain growth, it said. “We project that 1.8 percentage point (ppt) i.e., (a quarter share in growth) lift is likely from the labour component. The contribution of the sizeable working age population (quantity) is expected to be complemented by improvement in human capital (quality) and enhanced labour productivity,” it said.
Better human capital entails larger investment into necessities (education, health, sanitation, social protection systems etc.) and skill development, besides improving female participation in the labour market, it said.
Capital formation via faster investment growth will also be a crucial contributor to overall growth over the next decade and a half, with this driver expected to contribute 2.6ppt (40% of overall growth). This upcycle is likely to be driven by three catalysts, firstly real estate investments, led by households and private sector players; secondly, government expenditure together with the private sector players; lastly by attracting more foreign direct investments by improving the ease of doing business, it said.
An important part of this upcycle will be channeling funds towards a built-up in infrastructure capacity across roads & highways, railways, ports etc. Manufacturing share of GDP is poised to rise from ~17% now to 25% by 2047, with ~15% annual growth in the manufacturing sector to achieve that, it said.
