The Economic Powerhouse called India

India is emerging as an economy, and is seen to increase its foothold in the world economy. In ten years by 2028, according to nominal GDP, India will overtake Japan to become the third largest economy.

The Economic Powerhouse called India
The Economic Powerhouse called India

India is developing at a pace which is unbelievable, passing nations such as Brazil and Russia and will soon be crossing countries such as France.

“We see India crossing Germany and Japan in nominal GDP in dollar term by 2028. This assumes that the Indian economy grows at 10 per cent (in nominal US GDP) in the next decade, well ahead of Japan’s 1.6 per cent,” a Bank of America Merrill Lynch report stated.

This is assuming that the economy of India continues to grow at 10% over the next 10 years. If this is the case, India will become the fifth largest economy in the world by 2019.

There are three important drivers that is helping India rise.

The first is the falling dependency ratios which will raise saving and investment rates as a result. This will fund an estimated growth of 7% in real growth. This taken into value with 6% inflation and 3% depreciation will value the nominal growth to 10% in US dollar terms.

Financial maturity, which is due to financial liberalization, will lower lending rates. This will lead to credit to GDP ratio climbing to 83% which has been around 44% in 2001 to 2017. This will lead to pull down in interest rates.

The most important driver is income increasing, and this is expected at 7% real GDP growth. This will lead to demand increasing due to incomes rising and economies of scale increasing on the supply side.

India’s growth will be driven by services, and statistics of India has shown a climb of 10% to 70% in the last 20 years. These services have led to India’s growth. There is also the demand of commodities from India for the global markets.

India’s ranking in ease of doing business has also risen from 130th in 2017 to 100th in 2018. India is a sleeping giant which is slowly reaching financial maturity and modernizing its economy.