This country is going to become world's third largest economy leaving Japan and Germany behind.

India's economy might become world's third largest

                  According to a recent forecast by New York-based investment firm Morgan Stanley and S&P Global, India is likely to become world's third largest economy by 2030, leaving Japan and Germany behind. S&P's prediction is based on its projection that India's nominal GDP (Gross Domestic Product) growth will average 6.3% through 2030. Morgan Stanley estimates that India's GDP would become more than double of its current levels by 2031. India is also aiming to become world's third largest economy by 2030, but it is not going to be easy as there are certain challenges India will have to face in order to achieve this goal. In this article, we will discuss why India's economy is expected to grow in future, and what can go against India's favour.

How did Indian economy start growing?

                     India was impoverished, poor and under-developed in 1990's but it managed a turnaround by taking right financial decisions. Like China, India followed the policy of self-reliance. Instead of working for an import-driven economy, it focused to increase its exports through industrialisation and indigenous manufacturing. India decided not to depend on international financial organizations like IMF, World Bank and Asian Development Bank, or any foreign aid. When the economy got stable, India decided to invite foreign investors, and made investors-friendly policies. India used its manpower and low-cost labour to attract foreign investors. The plan worked, and foreign investors started taking interest in Indian market. 

                India's average annual GDP growth since 1990 is 6.25% which used to be 3.5% before 1990. Recently, famous companies like Mercedes and Apple have started manufacturing their products in India. Just a decade before, India's economy was at 11th position in the world and now it is on 5th spot. This phenomenal progress is what makes the experts believe that India would soon become world's third largest economy.

What's in favour of India:

               Considering India's manpower, it is easy to say that India has a huge potential to attract even more foreign investment. Sumedha Dasgupta, a senior analyst from the Economist Intelligence Unit says, 

            "India has the advantage of abundant low-cost labour, low cost of manufacturing and business-friendly policies. These factors make India an attractive choice for foreign investors."

             Indian government is trying to make Indian economy more export-driven by making the country a hub for foreign investors. Morgan Stanley experts say, "India has the conditions in place for an economic boom. Multinationals are more optimistic than ever about investing in India. Also, the Indian government is encouraging the foreign investment by building infrastructure and supplying land for the factories."

             Although Indian economy is on the right track but there are certain risk factors India will have to face.

Risk Factors:

            The are a lot of risk factors that could potentially challenge all the predictions and dampen Indian economy's growth. IMF has recently announced a global economic recession in near future which is not a good sign for Indian economy since India is highly trade-dependent economy with 20% of its output exported. India's finance ministry showed its concern saying, "A global slowdown may dampen India's export businesses." Other risk factors are supply of 'skilled' labour, current geopolitical situation, Russia-Ukraine war, and policy errors if a "weaker government" is elected in next elections.

IMF has announced a global economic recession in 2023

            S&P's projections also depends upon Indian government's investments in India's human capital (which is to invest in people of a country through healthcare, nutrition, quality education, jobs and skills). If India does not improve the life quality of its people, it will fail to achieve its goal. India should look to improve its GDP per capita (a number that describes the average annual income of a person in a country) because that's what eventually decides the life quality of the common man. Just a good GDP would not be enough for India considering its population.

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