Informist, Thursday, Sep 19, 2024

MUMBAI – Global rating agency S&P Global has projected India to become the third-largest economy in the world by 2030-31 (Apr-Mar). In a report titled 'India Forward: Emerging Perspectives', the rating agency said India's nominal GDP is likely to nearly double to $7 trln by 2023-31 from $3.6 trln in 2023-24.

"Increasing productivity should boost India's growth, allowing the economy to expand 6.7% on average to the end of the decade," S&P Global said. "This would make India the third-largest economy in the world, raising its share in global GDP from 3.6% to 4.5% and lifting its per-capita income to the upper-middle-income group".

"Despite cyclical moderation this fiscal year, India is set to remain the fastest-growing large economy and expand its contribution to global growth," it said.

The rating agency said that India's external buffers are vital as global risks rise from geopolitical tensions and trade disputes.

The country's position remains strong compared to others, supported by a sharply reduced current account deficit – 0.7% GDP in 2023-24, down from 2.0% in 2022-23 – robust foreign exchange reserves exceeding $650 bln, and steady fiscal consolidation efforts, the report said.

The declining current account deficit is due to 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. The purchasing manager's index surveys also indicate new business gains for Indian manufacturers and service providers globally, the report said.

S&P Global expects industrial investments to gain momentum, especially in traditional sectors such as steel and cement. The government's push for infrastructure, production-linked incentives and the revival of the housing sector are driving private investments, which are associated with traditional sectors. Government schemes, specifically for infrastructure, remain a key driver of India's growth, it said.

The report also highlighted the nature of the country as a small net lender, on a narrow net external debt basis. "This strong position reduces the economy's vulnerability to capital outflow pressures and ensures resilience in servicing balance of payments liabilities," the report said.

The recent inclusion of Indian government bonds on global bond indices will bring more inflows into the country, enabling greater foreign participation in local financial markets. The rating agency estimates gross portfolio inflows to India to be in the range $20-$30 bln over the next two years.

On inflation, the report said the Indian government's fiscal policy stance engenders better coordination with monetary policy to manage inflation. The full Budget for 2024-25 lowered the fiscal deficit target to 4.9% of GDP from 5.1% in the Interim Budget and 5.6% in the previous year.

In the current environment, the private sector needs to take the lead on achieving a balanced and sustainable lift in the investment cycle. Equally important is the limiting of food inflation by addressing structural bottlenecks and climate risks, as well as fostering conditions for supportive monetary policy, it said.

"India is well positioned to improve its prospects by continuing its infrastructure buildout and accelerating growth-enhancing reforms," the report said. End

US$1 = 83.68 rupees

Reported by Christina Titus and Sachi Pandey

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.