India’s GDP Rise: S&P Global Forecasts Surpassing Japan by 2030

PWOnlyIAS October 26, 2023 07:18 1944 0

Context: As per the S&P Global Market Intelligence’s recent report, India will surpass Japan to become the second largest economy in terms of GDP in the Asia-Pacific region by 2030.

India’s GDP Rise: S&P Global Forecasts Surpassing Japan by 2030

GDP Growth and Economic Outlook: India’s Soaring Economic Trajectory

India’s nominal GDP is forecasted to rise from USD 3.5 trillion in 2022 to USD 7.3 trillion by 2030.
India’s GDP is expected to surpass Japan and become the second-largest economy in the Asia-Pacific region by 2030.
Despite global economic deceleration, India’s economy is expected to remain one of the fastest-growing, making it a crucial long-term growth market for various industries.

India’s Accelerating Growth Trajectory: Near-Term Optimism and Long-Term Projections

Rapid Expansion: The report highlights a positive near-term economic outlook, with continued rapid expansion for the remainder of 2023 and 2024, driven by robust domestic demand.
Influx of FDI: The influx of foreign direct investments (FDI) into India over the past decade reflects the country’s favourable long-term growth prospects, bolstered by a youthful demographic profile and rising urban household incomes.
Increase in Nominal GDP: India’s nominal GDP will rise from $3.5 trillion in 2022 to $7.3 trillion by 2030.
- This rapid expansion will position India as the second-largest economy in the Asia-Pacific region, surpassing Japan.
- By 2022, India had already exceeded the GDP of the UK and France, and by 2030, it is expected to surpass Germany.
Current Status:
- As of now, the United States remains the world’s largest economy with a GDP of $25.5 trillion, representing a quarter of the world’s GDP.
- China holds the second-largest spot with a GDP of approximately $18 trillion, nearly 17.9 percent of the world GDP.
- Japan follows as the third-largest economy with a GDP of $4.2 trillion, and Germany is fourth with a GDP of $4 trillion.

India’s Thriving Economy: Unveiling Long-Term Growth Engines and Digital Transformation

Key Drivers for Economic Growth: The report cites several key drivers supporting India’s long-term economic outlook.
- These include a rapidly growing middle class, which fuels consumer spending, a booming domestic consumer market, and substantial investments from multinational corporations in various sectors, including manufacturing, infrastructure, and services.
Digital Transformation:
- Further, India’s ongoing digital transformation is set to accelerate the growth of e-commerce, reshaping the retail consumer market in the coming decade.
- This transformation has attracted global technology and e-commerce giants to invest in the Indian market.
- The report projects that by 2030, 1.1 billion Indians will have internet access, more than doubling from the estimated 500 million internet users in 2020.
Gaining FDI momentum:
- India’s robust FDI inflows, observed over the past five years, continue to gain momentum, even during the pandemic years of 2020-2022.
- Investments from global technology multinationals (MNCs) and a surge in FDI inflows from manufacturing firms are contributing to this growth.
Future Outlook:
- India is anticipated to remain one of the world’s fastest-growing economies over the next decade, making it a crucial long-term growth market for multinational companies across various industries, from manufacturing to services, including banking, insurance, asset management, healthcare, and information technology.

India’s Regional Growth Dynamics and Thriving Sectors: A Comprehensive Economic Analysis

India’s Labour Force and Skill Development:
- India’s short-term economic growth is supported by its large labour force of 678.6 million.
- Labour market reforms are essential for unlocking sustainable long-term growth.
- Skill development is crucial to shift the economic focus towards manufacturing.
State-wise Growth and Potential:
- Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh are predicted to be India’s top 5 growing states by 2030.
- Maharashtra’s GDP is estimated to reach USD 824.51 billion, and Tamil Nadu’s to reach USD 650.34 billion by 2030.
Manufacturing and Export Opportunities:
- India aims to raise manufacturing to 25% of GDP from 17.7% by 2025.
- Policy interventions in the smartphone sector demonstrate India’s ambitions for manufacturing, both for the domestic market and geopolitical purposes.
- India’s exports in telecom equipment, including smartphones, reached $11.8 billion in the 12 months to March 31, 2023.
Financial Market and Startup Ecosystem:
- Higher foreign participation in India’s domestic government debt market would lower the cost of new government debt issuance.
- Credit expansion growth is predicted to average 13% annually from 2023 to 2030.
- India’s startup ecosystem continues to thrive, attracting significant global venture capital, making India the fourth-most popular destination for startups globally in 2022.

About S&P Global:

S&P Global is a leading provider of financial information, credit ratings, benchmarks, analytics, and workflow solutions in the global capital, commodity, and automotive markets.

S&P Global’s businesses and divisions include:

S&P Global Market Intelligence: Provides financial information, data, and analytics to help clients make informed investment and business decisions.
S&P Global Ratings: Provides credit ratings and research to help investors assess the creditworthiness of issuers and securities.
S&P Dow Jones Indices: Compiles and maintains financial market indices, such as the S&P 500 and the Dow Jones Industrial Average.
S&P Global Platts: Provides benchmark prices and information for the energy, metals, and petrochemicals markets.
S&P Global Mobility: Provides automotive intelligence and analytics to help clients make informed decisions about the automotive market.

Understanding GDP Components and Calculation in the Indian Economy

GDP is the monetary measure of all “final” goods and services that are bought by the final user produced in a country in a given period.
Key “Engines of GDP Growth”:
All the money Indians spend for their private consumption (Private Final Consumption Expenditure or PFCE).
- All the money the government spends on its current consumption, such as salaries (Government Final Consumption Expenditure or GFCE).
- All the money spent towards investments to boost the productive capacity of the economy. This includes business firms investing in factories or the governments building roads and bridges (Gross Fixed Capital Expenditure).
- The net effect of exports (what foreigners spend on our goods) and imports (what Indians spent on foreign goods) (Net Exports or NX).
Calculation of GDP:
- GDP = private consumption + gross investment + government investment + government spending + (exports-imports).

Shifts in Measurement Standards:

Updation to GVA: India updated its GDP calculation methodology, transitioning to gross value added (GVA) at basic prices. This change provided a more accurate reflection of economic performance.

Gross Value Added:

The GVA calculates the same national income from the supply side.
It does so by adding up all the value added across different sectors.
According to the RBI, the GVA of a sector is defined as the value of output minus the value of its intermediary inputs.
This “value added” is shared among the primary factors of production, labour and capital.
The GDP and GVA are related by the following equation:
- GDP = (GVA) + (Taxes earned by the government) — (Subsidies provided by the government).

GDP Trends in Recent Quarters:

Q3 2022–23: Fluctuations and Causes
- India’s GDP growth rate dipped to 4.4% in the third quarter.
- Notably, the agricultural sector saw a rise from 2.4% to 3.7%, while a decline in manufacturing, reduced demand, and low government spending contributed to the overall slowdown.

India’s Global Economic Standing

Historical Perspective:
- Historically, India’s economy has shown resilience, averaging growth rates between 6-7% in the past decade.
- Despite challenges, India has ascended in global rankings, becoming the world’s fifth-largest economy, trailing only the United States, China, Japan, and Germany.
Future Outlook:
- Forecasts suggest India’s economy might grow at 6.0-6.8% in 2023-24, following a 7% growth in the previous fiscal year.

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Frequently Asked Questions

GDP, or Gross Domestic Product, measures the total value of goods and services produced within a country, providing a vital overview of economic health.

S&P Global offers financial information, credit ratings, benchmarks, and analytics in global markets, including divisions like S&P Global Market Intelligence and S&P Global Ratings.

GVA (Gross Value Added) calculates national income from the supply side, representing the value added across sectors. GDP = GVA + Taxes - Subsidies.

India transitioned to GVA at basic prices for more accurate economic performance reflection, abandoning GDP at factor cost.

The decline was due to a rise in the agricultural sector (3.7%) but a drop in manufacturing, reduced demand, and low government spending.

Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh, with Maharashtra's GDP estimated at USD 824.51 billion, and Tamil Nadu's at USD 650.34 billion.

India's economy is predicted to grow between 6.0-6.8% in the fiscal year 2023-24.

India aims to raise manufacturing to 25% of GDP from the current 17.7% as a part of its economic strategy.

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India’s GDP Rise: S&P Global Forecasts Surpassing Japan by 2030

GDP Growth and Economic Outlook: India’s Soaring Economic Trajectory

India’s Accelerating Growth Trajectory: Near-Term Optimism and Long-Term Projections

India’s Thriving Economy: Unveiling Long-Term Growth Engines and Digital Transformation

India’s Regional Growth Dynamics and Thriving Sectors: A Comprehensive Economic Analysis

Understanding GDP Components and Calculation in the Indian Economy

Shifts in Measurement Standards:

GDP Trends in Recent Quarters:

India’s Global Economic Standing

Frequently Asked Questions

What is GDP, and why is it essential?

Who is S&P Global, and what services do they provide?

What is GVA, and how does it relate to GDP?

Why did India update its GDP calculation methodology?

What were the causes of India's GDP dip in Q3 2022-23?

Which states are predicted to be India's top growing states by 2030?

What is the forecasted growth rate for India in 2023-24?

What is the aim of India's manufacturing sector by 2025?

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