Unstoppable India: S&P Global Projects $6.7 Trillion Economy by 2031

by Manjari Singh

In a promising projection, S&P Global, the renowned US-based credit ratings agency, foresees India’s economy expanding at an impressive annual growth rate of 6.7% from fiscal year 2024 to 2031. This upward trajectory is expected to propel the country’s Gross Domestic Product (GDP) from $3.4 trillion in fiscal year 2023 to a staggering $6.7 trillion. Alongside this growth, per capita GDP is estimated to rise to approximately $4,500.

The report, titled ‘Look Forward: India’s Money,’ emphasizes that capital accumulation will play a pivotal role in driving India’s growth. The government’s substantial support for infrastructure projects and incentivizing manufacturing has contributed to investment as a proportion of GDP reaching a ten-year high of 34% in fiscal year 2023. The private sector is also expected to boost investments, thanks to healthy corporate balance sheets.

According to the joint findings authored by S&P Global’s experts, including Global Chief Economist Paul Gruenwald, Crisil Chief Economist Dharmakirti Joshi, and S&P Global Market Intelligence Chief Economist Asia Pacific Rajiv Biswas, capital is projected to be the dominant contributor, accounting for 53% of India’s average GDP growth of 6.7% throughout the next decade. Labor’s contribution is expected to be 17%, while increases in productivity are predicted to drive 30% of the country’s GDP growth.

While the report paints an optimistic outlook for India, it also acknowledges potential challenges. A global economic slowdown and the delayed impact of a policy rate hike by the Reserve Bank of India (RBI) could temporarily dampen growth to 6% in the current fiscal year.

Addressing macro challenges, the report suggests that the key to sustained growth lies in transforming traditionally uneven economic expansion into a robust and stable trend. India is poised to benefit from crucial reforms, such as the Goods and Services Tax (GST) and the implementation of the Insolvency and Bankruptcy Code, which are expected to foster a healthy credit culture. Despite a shift towards manufacturing, the services sector will continue to play a vital role in the economy.

Looking ahead, the report highlights the importance of focusing on structural reforms in three key areas: increasing labor participation, particularly among women, enhancing skills, fostering private investment in manufacturing, and bolstering external competitiveness through foreign direct investment (FDI).

Dharmakirti Joshi, Chief Economist at Crisil, predicts that growth may peak around fiscal year 2025-26, indicating that the coming years hold significant potential for India’s economic rise.

With a favorable outlook and the right reforms in place, India is poised to secure its position as a formidable global economic player, setting its sights on a remarkable $6.7 trillion economy by 2031.

Manjari Singh

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