With 8% Growth, India’s Contribution to Global GDP Would Almost Be on Par with China by 2028: Barclays
Ira Singh
11 Oct’23
India’s economic prowess continues to make headlines as Barclays, the British multinational investment bank, predicts that the country’s remarkable growth trajectory could lead to its contribution to the global Gross Domestic Product (GDP) nearing China’s by the year 2028. The forecast comes as India consistently records robust economic expansion, driven by various factors such as demographic advantages, economic reforms, and investments in key sectors.
According to Barclays’ latest economic report, India’s GDP is expected to maintain an impressive growth rate of 8% annually for the next five years. This forecast indicates that by 2028, India’s economy could be closing in on China’s in terms of its global share of GDP.According to Barclay’s analysts, India’s growth has outperformed the rest of the world, achieving robust expansion with relatively low inflation and it is on the way to achieve at least 6 percent GDP growth, while keeping broad macro stability intact.
But a key question, the report says is whether authorities can “encourage more rapid growth without compromising India’s hard-won macro stability that has dominated India’s growth ambitions since the start of the Ukraine-Russia war”.“Amid considerable economic turbulence in rest of the world, India has been an island of relatively better macro outcomes in the past two years. On the surface, India is once again poised to be the fastest-growing major economy in the medium term, as global growth is expected to be weaker through 2023-2024 (compared to historical levels),” the report says.
Calling India’s investment turnaround ‘remarkable’, the report highlights that this change in India’s investment appeal comes only a decade after it was part of the so-called ‘Fragile Five’ economies where it was facing significant macro instability “in the form of a heavy debt burden, an unstable financial sector, and a weak fiscal profile, policy conditions.”
In 2023, while India’s growth has slowed, the report says that it has remained higher than its global peers along with “ample macro stability”. The government, it says, is also focused on managing inflation. But despite being the fastest growing major economy (ex-China) over the past decade, when it comes to contribution to global GDP, India has remained in the 10 percent handle. Currently, India accounts for a “much smaller share of the global economy than China” and even lower than the US.
While the report says that while India will “likely continue to outpace China on growth in the next five years under current growth projections (IMF), its contribution to global GDP will still lag.”
Achieving GDP Growth
This growth, the report says, can be achieved if the government puts in place a number of economic preconditions such as nominal savings rate closer to 32.3 percent of GDP against the current 30.2 percent and incremental growth in the workforce of 3.5 percent per annum against the 1 percent now. This, the report says, can be achieved through “increased female participation, a larger global export share and ongoing productive use of capital quantified as an ICOR (incremental capital output ratio)of around 5″.
Additionally, the report calls for more public investment to “drive the structural shift upwards in overall investment and push the GDP growth rate closer to 8 percent”.