Goldman Sachs predicts that India is poised to become the world’s second-largest economy by 2075, surpassing not only Japan and Germany but also the United States. The factors driving this forecast include a growing population, progress in innovation and technology, increased capital investment, and rising worker productivity.

Goldman Sachs Research’s India economist, Santanu Sengupta, highlighted that India’s low dependency ratio, which measures the number of dependents against the total working-age population, will contribute to its economic potential over the next two decades. This ratio suggests that there will be a higher proportion of working-age adults able to support the youth and elderly, providing an opportunity for India to capitalize on its rapidly growing population.

To unlock the potential of the labor force, Sengupta emphasized the importance of boosting labor force participation by setting up manufacturing capacity, continuing to grow services, and investing in infrastructure. The Indian government has prioritized infrastructure development, especially in roads and railways, as reflected in the recent budget.

In addition to infrastructure, technology and innovation are playing a significant role in driving India’s economic trajectory. The country’s technology industry revenue is expected to increase, and capital investment is predicted to be a key driver of growth. With falling dependency ratios, rising incomes, and deeper financial sector development, the savings rate in India is likely to increase, making more capital available for further investment.

However, there are potential downside risks to these projections. The report highlights that the labor force participation rate in India has declined over the past 15 years, particularly for women. The low participation rate for women, with only 20% of working-age women in employment, is a concern. Additionally, India’s current account deficit due to net exports has been a drag on growth, although services exports have helped balance the current account.

While Goldman Sachs predicts India’s ascent to the second-largest economy by 2075, it’s worth noting that other organizations, such as S&P Global and Morgan Stanley, have also predicted that India is on track to become the third-largest economy by 2030. India’s first-quarter GDP growth in the year-on-year comparison was 6.1%, beating expectations, and the country’s full-year growth is estimated to be 7.2% in comparison to 9.1% in the previous fiscal year (2021-2022).

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