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India is projected to become the second largest economy in the world by 2075, surpassing Japan, Germany and the United States, investment bank Goldman Sachs said in a report. India is currently the 5th largest economy in the world.
As per the Goldman Sachs report, the factors driving this forecast are favourable demographics, innovation and technology, higher capital investment and rising worker productivity.
"Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies," the report said.
According to Santanu Sengupta, Goldman Sachs Research's India economist, innovation, increasing worker productivity and capital investment is also going to be a significant driver of growth going forward.
"Yes, the country has demographics on its side, but that's not going to be the only driver of GDP. Innovation and increasing worker productivity are going to be important for the world's fifth-biggest economy. In technical terms, that means greater output for each unit of labor and capital in India's economy," he said.
"India's savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment," he added.
The report said the government placed a priority on infrastructure creation, especially in the setting up of roads and railways. Goldman Sachs believes that this is an appropriate time for the private sector to scale up on creating capacity in manufacturing and services in order to generate more jobs and absorb the large labor force.
DOWNSIDE RISKS
The report mentioned that the main downside risk for India's economic growth would be if the labour force participation rate does not increase.
"The labor force participation rate in India has declined over the last 15 years," the report noted, underlining that women's participation rate in the labor force is significantly lower than men's.
As per the Goldman Sachs report, the factors driving this forecast are favourable demographics, innovation and technology, higher capital investment and rising worker productivity.
"Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies," the report said.
According to Santanu Sengupta, Goldman Sachs Research's India economist, innovation, increasing worker productivity and capital investment is also going to be a significant driver of growth going forward.
"Yes, the country has demographics on its side, but that's not going to be the only driver of GDP. Innovation and increasing worker productivity are going to be important for the world's fifth-biggest economy. In technical terms, that means greater output for each unit of labor and capital in India's economy," he said.
"India's savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment," he added.
The report said the government placed a priority on infrastructure creation, especially in the setting up of roads and railways. Goldman Sachs believes that this is an appropriate time for the private sector to scale up on creating capacity in manufacturing and services in order to generate more jobs and absorb the large labor force.
DOWNSIDE RISKS
The report mentioned that the main downside risk for India's economic growth would be if the labour force participation rate does not increase.
"The labor force participation rate in India has declined over the last 15 years," the report noted, underlining that women's participation rate in the labor force is significantly lower than men's.
MSN
www.msn.com
