A new economic report issued by Goldman Sachs. Unmitigated, this contains how a country in Asia will defeat China, Japan, and even the United States (US).
That country is India. The land of Bollywood material is said to be able to catch up with Uncle Sam and will become the second largest economy in the world in 2075, overtaking China.
India itself is currently in the 5th position of the world’s largest economy. Currently the 4th police are occupied by Germany, then Japan, China and the US.
Described there are a number of factors that encourage. Starting from developments in innovation and technology, higher capital investment, and increased worker productivity
“Over the next two decades, India’s dependency ratio will be one of the lowest among regional economies,” said Goldman Sachs Research India economist Santanu Sengupta, quoted by CNBC International, Tuesday (11/7/2023).
A country’s dependency ratio is measured by the number of dependents to the total working-age population. A low dependency ratio indicates that proportionally more adults of working age are able to support the young and the elderly.
He added that the key to attracting the potential of India’s fast-growing population is increasing its workforce participation. He predicts that India will have one of the lowest dependency ratios of any major economy over the next 20 years.
“So that’s really the window for India to get it right in terms of getting production capacity ready, continuing to scale up services, continuing infrastructure growth,” he said.
Meanwhile, the Indian government has prioritized infrastructure development, especially in the construction of roads and railroads. The state budget recently aimed to continue a 50-year interest-free loan program to the state government to spur investment in infrastructure.
Goldman Sachs believes that this is the right time for the private sector in the country to increase production and service capacity. This will certainly result in more jobs and absorb a large workforce.
“India’s saving rate is likely to improve with reduced dependency ratios, increased incomes and deeper development of the financial sector, which is likely to make capital pools available to encourage further investment,” he explained.
In addition to the dependency ratio, India is also experiencing rapid economic growth from the technology sector. According to the Indian non-governmental trade association Nasscom, India’s technology industry revenue is expected to increase by US$245 billion by the end of 2023.
“That growth will come from across Information Technology (IT), business process management, and software product flows,” according to the Nasscom report.
Even so, there are challenges facing India in developing its economy. This is related to the labor force participation rate, which has declined over the past 15 years.
“Only 20% of all working-age women in India are employed,” the investment bank wrote in a separate report in June.
Net exports have also been a drag on India’s growth, as the country currently runs a current account deficit. Goldman highlighted that services exports have protected India’s current trade balance so far.
“India’s economy is driven by domestic demand, unlike many other export-reliant economies in the region, up to 60% of its growth is primarily due to domestic consumption and investment,” added the Goldman report.
The Big Three of the World in 2030
In fact, similar predictions also emerged from S&P Global and Morgan Stanley. India is predicted to become the world’s third largest economic power by 2030, trailing China and the US.
Its economy will surpass that of fellow Asians, Japan, including European countries, Germany and the UK. The S&P forecast points to gross domestic product (GDP) growth that will average 6.3% through 2030 while Morgan Stanley predicts India’s GDP is likely to more than double by 2031.
“India has the conditions for an economic boom driven by offshoring, investment in manufacturing, energy transition, and a developed digital infrastructure of the country,” wrote Morgan Stanley analysts led by Ridham Desai and Girish Acchipalia in the late 2022 report.
“This driver will make [India’s] economy and stock market the third largest in the world before the end of the decade,” he added.
Not only the Asian economic giant, India is also believed to be starting to become the new debt-giving giant in Asia. In a Financial Times (FT) report, India has stepped up its efforts in extending tens of billions of dollars in credit to neighboring countries, including recipients of China’s Belt and Road (BRI) grant.
This includes those currently struggling financially such as Sri Lanka and the Maldives. In the Maldives, India funded the US$ 500 million (Rp 7.7 trillion) ‘Male Raya Connectivity Project’, which also built a 7 km long bridge connecting the capital to several other islands in the vicinity.
“The Narendra Modi government is starting to develop a feeling that India needs to do something,” said C Raja Mohan, a senior fellow at the Asian Institute of Public Policy in Delhi.
“The geopolitical contest with China is much more lively,” he added.
Source : CNBC