Goldman Sachs Forecasts: Is India on Track to Become the Second-Largest Economy by 2075?

India's population of 1.4 billion people, along with various favorable factors, positions the country for remarkable economic growth. According to Goldman Sachs, India's GDP is projected to expand dramatically, reaching $52.5 trillion by 2075, slightly surpassing the GDP projection of the United States.

"Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies," says Santanu Sengupta, Goldman Sachs Research's India economist. India's population boasts a favorable ratio between the working-age population and dependents (children and elderly). This demographic advantage gives India a crucial window of opportunity to leverage manufacturing capacity, drive service sector growth, and invest in infrastructure development.

"Innovation and increasing worker productivity are going to be important for the world's fifth-biggest economy," highlights Sengupta. Goldman Sachs emphasizes that India's progress in innovation and technology will be key drivers of its GDP growth. By fostering innovation and enhancing worker productivity, India can achieve greater output per unit of labor and capital, paving the way for sustained economic expansion.

Capital Investment: Fueling Growth

"Driven by favorable demographics, India's savings rate is likely to increase," explains Sengupta. Falling dependency ratios, rising incomes, and the development of a deeper financial sector will contribute to a larger pool of available capital for driving further investment. Capital investment plays a vital role in fueling economic growth, and India's favorable demographic trends create a conducive environment for attracting and utilizing capital effectively.

Goldman Sachs highlights India's gradual demographic transition as a distinctive advantage. Compared to the rest of Asia, India experiences a slower decline in birth and death rates, which extends the period of demographic dividend. By effectively managing this transition, India can capitalize on its favorable demographics and sustain economic expansion in the long run.

"While India's population of 1.4 billion becomes the world's largest, its GDP is forecast to expand dramatically," states Goldman Sachs. However, one potential risk to India's growth is the declining labor force participation rate witnessed over the past 15 years. Sengupta explains that creating more opportunities, particularly for women with lower participation rates, is crucial to shoring up the labor force participation rate. By increasing opportunities and promoting inclusivity, India can unlock its full growth potential.