According to Goldman Sachs, India is poised to overtake the United States and become the world’s second-largest economy by 2075. The forecast estimates that India’s GDP will soar above $50 trillion in the next 52 years, reaching milestones such as $6.6 trillion by 2030, $13 trillion by 2040, $22 trillion by 2050, and $30 trillion by 2060. Surprisingly, Japan, currently the third-largest economy, is projected to have a GDP of $7.2 trillion by 2075, while Europe’s GDP is expected to be around $30 trillion.Goldman Sachs identifies several key factors that will contribute to India’s economic growth and surpassing the US. These include progress in innovation and technology, favorable demographics, increasing worker productivity, capital investment, healthy balance sheets of private corporates and banks, infrastructure development, a rising population, robust domestic consumption, reduced dependence on commodities, transition to green energy, and improvements in the current account deficit.India’s large population is viewed as an opportunity, but the challenge lies in effectively utilizing its labor force by increasing the labor force participation rate. The report highlights the importance of creating opportunities for the labor force to be absorbed, while also focusing on training and upskilling to enhance productivity.The implementation of Aadhaar, the world’s largest biometric ID system, has significantly improved public service delivery in India. The identification system enables online and physical verification of the country’s 1.4 billion population, facilitating targeted service delivery and expanding access to credit for small businesses. These factors can contribute to increased productivity and further drive economic growth.The report also acknowledges India’s historical dependence on commodities, particularly crude oil, as a major factor impacting the country’s cash reserves. However, over the past five years, India has demonstrated growing resilience in its external balance dynamics. Structural improvements in the current account, driven by services exports, and the central bank’s efforts to build reserve buffers have strengthened the country’s ability to withstand fluctuations in commodity prices and dollar strength.India’s transition to green energy presents a significant investment opportunity. With an aim to achieve net-zero emissions by 2070 and generate 50% of power from non-fossil fuel sources by 2030, the government is actively promoting electric vehicles, green hydrogen, and renewable energy. While the transition will take time, fossil fuels will continue to play a dominant role in India’s energy needs until the shift to green energy is fully realized.The report identifies the main downside risk to India’s economic growth as the failure to increase the labor force participation rate. Over the past 15 years, India has experienced a decline in labor force participation, particularly among women. By creating more opportunities, especially for women, India can bolster its labor force participation rate and unlock further potential for growth.In summary, Goldman Sachs’ projections indicate a promising future for India’s economy, with the country poised to surpass the US and become the world’s second-largest economy by 2075. Factors such as innovation, demographics, productivity, investment, infrastructure development, domestic consumption, green energy transition, and improvements in the labor force participation rate are expected to contribute to India’s economic ascent.
