According to a report by S&P, the Indian economy is projected to grow at a rate of 6.7% per year from FY24 to FY31, leading to a GDP of $6.7 trillion in FY31, up from $3.4 trillion in FY23. The per capita GDP is expected to increase to about $4,500. The growth will be driven by capital accumulation, with investments in infrastructure and manufacturing from both the government and private sectors. Digital infrastructure is also seen as a key driver of growth.
To achieve this growth, the report highlights several key areas that India needs to focus on. These include reaping its demographic dividend by increasing labour force participation and upskilling workers, boosting private investment through structural reforms in land, logistics, and labour, and increasing competitiveness through foreign direct investment. Geopolitics is also seen as a potential tailwind for India’s growth.
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The report also points out that India’s consumer market is expected to more than double by 2031, reaching $5.2 trillion. The services sector will remain a key driver of India’s export growth, with rising comfort with remote work and the growth of global capability centres in the country.
However, the report also highlights some challenges that India needs to address. The country is failing to take advantage of its growing working-age population, with labour force participation at only 55.2% in 2022, and only 32.8% women in the labour force. Upskilling workers and increasing labour force participation, especially among women, are crucial for India’s growth. Manufacturing has also been held back by stringent labour laws, subpar logistics, and poor infrastructure, and the authorities are working to address these issues.
Overall, the report suggests that India has significant potential for growth, but it will need to address these challenges and focus on the key areas mentioned to achieve its growth targets.
