India will emerge as the largest economic superpower by the end of the century, with gross domestic product (GDP) 90 per cent larger than China’s and 30 per cent larger than the US, a new report has revealed.
The World Economic League Table report by London-based Centre for Economics and Business Research (CEBR) said that India will sustain robust growth, averaging 6.5 per cent from 2024 to 2028, to surpass Japan and Germany as the world’s third-largest economy by 2032.
“India is expected to overtake both China and the US after 2080, based on demographic estimates and projections,” the report added.
The forecasts suggested that China’s dominance will be short-lived, as the US is anticipated to possess a GDP that is 45 per cent larger than China’s by the year 2100.
According to the report, the country’s large and youthful population, a growing middle class, a dynamic entrepreneurial sector, and increasing global economic integration will be some key drivers of growth.
“In 2023, government debt as a percentage of GDP is expected to reach 81.9 per cent, exceeding the 81 per cent recorded in 2022. Government borrowing is estimated at 8.8 per cent of GDP in 2023, reflecting an expansionary stance with increased spending on infrastructure, healthcare, and social welfare. Noteworthy reforms to stimulate private investment, such as easing foreign direct investment norms, state-owned enterprise privatisation efforts, and tax regime simplification, aim to enhance the business climate and productivity in the long run,” the report said.
“The year 2024 holds significance for India, hosting the next general elections that will shape the nation’s political trajectory for the next five years. The election outcomes will significantly impact India’s domestic and foreign policy, as well as its relations with neighbouring countries and major global powers.”
The study, however, said that India needs to address challenges such as poverty reduction, inequality, human capital, infrastructure improvement, and environmental sustainability.
India recorded a strong GDP growth of 7.2 per cent in 2022-23. CEBR anticipates a slight moderation in growth at 6.4 per cent for 2023-24, resulting in output surpassing pre-pandemic levels by 17.2 per cent.
The CEBR report has projected the inflation to close at around 5.5 per cent in 2023, despite robust output growth due to food and energy price shocks.
The report further said that Germany is anticipated to relinquish its third position to Japan in 2026, following an expected overtake in 2023. Subsequently, Germany is projected to concede the fourth position to India in 2027.
UK slowdown to linger into 2024
The CEBR report anticipates the UK’s economic challenges in 2023 to persist into 2024, resulting in another year of modest growth at 0.5 per cent. Subsequent years may witness a more robust 1.9 per cent growth starting in 2025 as monetary policy becomes more accommodating, settling at an annual trend rate of 1.6 to 1.8 per cent. Despite fluctuations, the UK is expected to maintain its sixth position in the global economic rankings.
The report said, “Tighter interest rate environment is discouraging investment and spending, thereby contributing to weaker output. Higher interest rates are also expected to have other effects on the UK economy, notably in the housing market, where prices have started to show annual declines in recent months. Nevertheless, the tighter policy environment is having a tangible impact on inflation, with price growth expected to slow further into 2024 and beyond.”