As per the recent World Economic Outlook of the IMF, India has surpassed Japan to become 4th largest economy worldwide.
Key drivers for India’s Economic Leap
- Structural: Urbanization and rising aspirations leading to rise in per capita income and lifestyle consumption, demographic dividend (India’s current median age is ~29 years), strong domestic demand (private consumption contributes nearly 70% to GDP), etc.
- Policy: Taxation and business reforms (implementation of GST, IBC, Corporate Tax cuts, etc.), push for infrastructure (National Infrastructure Pipeline, PM Gati Shakti, etc.), Atmanirbhar Bharat and Production-linked incentive, etc.
- Technological: Digital Public Infrastructure (UPI, JAM Trinity, etc.), strong global demand for Indian IT, software exports, and consulting services, etc.
- External and global factors: Increased FDI inflows, Global supply chain rebalancing with strategies like ‘China Plus One’ and Supply Chain Resilience Initiative, etc.
Future prospects for the Indian Economy
India is well positioned to become 3rd largest economy in the coming 2.5 to 3 years due to factors like:
- Energy transition: Rapid growth in renewable energy capacity (targeting 500 GW by 2030) and leadership in global platforms like the International Solar Alliance (ISA) positions India as a green growth leader.
- Regulatory stability: Reforms in banking sector (e.g., bank recapitalization) and strong regulatory institutions like RBI ensure macroeconomic stability.
