India As The World’s Third Largest Economy? Here’s How Long It Will Take

A recent article by Goldman Sachs projects India to become the world’s second-largest economy by 2075. But how reliable are such forecasts?

Long-term trend-based GDP forecasting is an assessment of the average growth in countries, economic climate and the world economy. It uses a combination of model-based analyses and expert judgement.

Another way to forecast is when economists make assumptions regarding changes in the structure of the economy, said NR Bhanumurthy, vice chancellor of Dr B.R. Ambedkar School of Economics University. For instance, change in the share of investments or services. In either case, the probability of achieving that forecast is lower with the increase in duration, he said.

According to Radhika Pandey, associate professor at the National Institute of Public Finance and Policy, very long-term predictions should be taken with a pinch of salt.

She cited the example of recent years when the world economy has grappled with too much uncertainty—the pandemic, Russia’s invasion of Ukraine, unprecedented inflation in the developed economies, monetary tightening and the consequent growth slowdown. Such factors, Pandey said, could continue.

Still, long-term forecasting does help provide a general sense of direction, she said, and while such numbers might not be trustworthy, they provide insights into how to boost growth or productivity.

Perhaps, that’s the reason why the government targets India to be an advanced economy by 2047.

While the IMF classifies high income and advanced economies as those with per capita nominal GDP exceeding $21,664, World Bank’s threshold is $30,351.

The Reserve Bank of India said in a paper that gross domestic product needs to grow by 7.6% from 2023–24 to 2047–48 to meet IMF’s criterion. But to become a high income economy by World Bank’s standard, India’s GDP needs to grow 9% during the period.

Back to the original question: Will India become the world’s third largest economy in five years, as the Prime Minister predicted? Most likely. Will it be an advanced economy by 2047? That’s a tall order.