India will be the world’s third largest economy and an upper middle income country by fiscal 2031, market research firm CRISIL has predicted. The agency forecasts India’s GDP to grow 6.8% next fiscal after a 7.6% expansion during the current fiscal.

CRISIL’s India Outlook 2024 report, released on March 6, said the country’s growth momentum will continue through this decade, piggybacking significant private investments in emerging sectors, continuing government spending on infrastructure build out, ongoing reforms push and efficiency gains from increasing digitalisation and physical connectivity.

“The next seven fiscals will see the Indian economy cross the $5 trillion mark and close in on $7 trillion at an estimated 6.7% average annual growth. By fiscal 2031, India will be the No. 3 economy and an upper middle-income country, which will be a big positive for domestic consumption. India’s manufacturing sector is at a sweet spot due to high capacity utilisation across key sectors, opportunities from global supply-chain diversification, thrust on infrastructure investment, the green-transition imperative and strong balance sheets of lenders”, Amish Mehta, Managing Director and CEO of CRISIL Ltd, said.

“Continuous reforms, enhanced global competitiveness and moving up the value chain will boost the share of manufacturing in India’s GDP beyond the projected 20% in fiscal 2031”, he adds.

The report notes that after years of stagnancy, fixed investments by private companies have started inching up and have ample headroom for growth, while government initiatives keep boosting the infrastructure segments in India. It also points out that enhanced profitability and strategic deleveraging have created healthier balance sheets for Indian firms. CRISIL estimates India Inc., revenue growth to be in the range of 9-10% next fiscal. The report says India’s industrial capex will rise to Rs 6.5 lakh crore annually on average between FY 2024 and 2028 from Rs 3.9 lakh crore in the preceding five fiscals.

“There is ample opportunity for both manufacturing and services to cater to domestic and global demand. We project manufacturing and services to grow 9.1% and 6.9%, respectively, between fiscals 2025 and 2031. Despite some growth catch-up by manufacturing, services will remain the dominant driver of India’s growth”, Dharmakirti Joshi, Chief Economist, CRISIL notes.

The near- and medium-term challenges identified in the report include geopolitical uncertainties, global indebtedness, uneven global economic recovery, climate change and technological disruptions. 

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