India set to be world's third largest economy by 2027, finance ministry says
- The Finance Ministry said it expects India to grow at or above 7% in fiscal year 2024 and another year of 7% growth in 2025.
- "The government has, however, set a higher goal of becoming a 'developed country' by 2047," according to India's chief economic advisor.
India could become the world's third-largest economy by 2027 with a gross domestic product of $5 trillion, the finance ministry has said.
The projections come ahead of an interim budget due to be released later this week.
In a report released Monday, the finance ministry said the economy is poised to grow at or above 7% in the fiscal year 2024. India's fiscal year starts on April 1 and ends on March 31.
If it meets this year's target, it will be the third straight year of 7% GDP growth for India.
The country's GDP currently stands at $3.7 trillion.
India's chief economic advisor, V Anantha Nageswaran, said the government's goal is to become a developed country by 2047.
"The robustness seen in domestic demand, namely, private consumption and investment, traces its origin to the reforms and measures implemented by the government over the last ten years," Nageswaran said in the report, explaining the key drivers of India's growth.
He said investment in both physical and digital infrastructure helped boost the supply side and manufacturing. As a result, "real GDP growth will likely be closer to 7 per cent" in fiscal year 2025, he added.
The document released Monday was not the Economic Survey of India, which is prepared by the Department of Economic Affairs ahead of the Union Budget.
The Union Budget will only be released after the general election between April and May this year — the interim budget will be presented by Finance Minister Nirmala Sitharaman on Thursday, and is not likely to include any major changes to spending or tax policies.
According to Goldman Sachs, India is poised to become the world's second-largest economy by 2075, leapfrogging not just Japan and Germany, but the U.S. too.
Currently, India is the world's fifth-largest economy, behind the U.S., China, Japan and Germany.
Stock market optimism
India stocks are off to a positive start this year.
The Nifty 50 index rose more than 20% in 2023 after staging record-breaking rallies last year. This month, the index breached 22,000 for the first time.
Growing optimism around the world's most populous country's growth prospects as well as higher liquidity and more domestic participation have been key factors in boosting the rally.
Hopes of further policy continuity have also been a driver in the rally, as India gears up for its general election between April and May.
Investors are betting that the Reserve Bank of India will cut interest rates this year, most likely in the second half — which will likely lift stock markets as well as spur higher spending in the economy.