India seems "unstoppable" in its momentum to become the third economic superpower and touch the $10-trillion mark by 2035, according to the Centre for Economics and Business Research (CEBR). Over the next five years, India's annual rate of GDP growth is expected to average 6.4%, after which the growth is expected to average 6.5% in the subsequent nine years. This growth trajectory will propel India from fifth place on the CEBR's World Economic League Table in 2022 to third in the global rankings by 2037, says the report.
India was the fastest-growing economy in the world in FY 2021-22, thanks to a rebound in economic activity after the Covid pandemic hit the economy hard. For India, FY23 is going to end on a high note, says the consultancy, adding that it expects India's growth in the fiscal year 2022/23 to remain robust at 6.8%. "This, in turn, would bring output 8.4% above 2019 levels. Output growth is expected to ease in the fiscal year 2023/24, however, with CEBR forecasting growth of 5.8%, as accelerating price levels bite into domestic demand," says the British consultancy.
The report titled ‘World Economic League Table 2023’ says the annual inflation in India has exceeded the target in 2022, at 6.9%, thereby it remains above the Reserve Bank of India’s (RBI) tolerance band upper margin of 6%. However, the inflation in the country has been lower than in “most other large economies” and inflation remains both closer to its target range, it says.
"Moreover, much of India’s current inflation rate reflects higher food prices, an erratic item but one that also accounts for a larger share of the consumer basket than in any other G20 country. The uptick in inflation has nevertheless been softened by India’s purchase of discounted Russian energy," says CEBR.
Notably, the year 2022 saw the Reserve Bank of India (RBI) consistently raising interest rates to bring back inflation to its target range. "Higher borrowing costs will weigh on public debt, especially on top of expanded infrastructure spending and targeted fiscal measures."
"The government debt currently stands at 83.4% of GDP, with a high fiscal deficit amounting to 9.9% of GDP in 2022," says the report, adding that fiscal consolidation will eventually be necessary to ensure that debt levels do not destabilise the economy.
Among the world’s biggest economies, with China’s growth slowing and the US remaining robust, there is likely to be quite a long period where the two economies are very close to each other in size, says the report. CEBR predicts that China will overtake the US in 2036. "Does this matter? Not really. Given the uncertainty about the base data and the differences in the structures of the two economies, the actual overtaking means very little. The fact that the two economies are likely to be of similar orders of magnitude for a long time means rather more."
And of course, eventually, in the latter part of the current century, both China and the US are “likely to be joined by India as a third economic superpower”, said the report.