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With India’s population of 1.4 billion people set to become the world’s largest, there are significant projections for the country’s GDP expansion. Goldman Sachs Research forecasts that by 2075, India will possess the second-largest economy globally.
To unlock the potential of this growing population, India needs to focus on enhancing labour force participation and providing training and skills development for its vast talent pool, according to Santanu Sengupta, Goldman Sachs Research’s India economist. Sengupta highlights that India’s dependency ratio will be among the lowest in regional economies over the next two decades. This advantageous ratio between the working-age population and dependents presents a window of opportunity for India to develop manufacturing capabilities, further grow its services sector, and invest in infrastructure.
Sengupta further emphasizes the importance of innovation and increasing worker productivity for India’s economy. While demographics play a favourable role, they alone cannot drive GDP growth. Enhancing output per unit of labour and capital in the economy will be a crucial factor in India’s journey to becoming the world’s fifth-largest economy.
Capital investment is expected to be a significant growth driver as well. With favourable demographics, falling dependency ratios, rising incomes, and deeper financial sector development, India’s savings rate is likely to increase. This, in turn, will provide a greater pool of capital for driving further investments.
The government has played a substantial role in supporting growth, but the conditions are now conducive for a private sector capital expenditure cycle, given the healthy balance sheets of private corporates and banks in India, he said.
Furthermore, India’s favourable demographics will contribute to potential growth in the forecasted period. While the country’s large population presents an opportunity, the challenge lies in effectively utilizing the labour force by increasing the labour force participation rate. This requires creating opportunities for absorption while simultaneously providing training and upskilling programs, the economist added.
Addressing the transition to green energy, Goldman Sachs Research’s India economist views it as an opportunity for India. The country has set ambitious goals, aiming for net-zero emissions by 2070, with 50% of power generation capacity coming from non-fossil sources by 2030. The government is actively promoting electric vehicles (EVs) and green hydrogen, with a target of 500 GW of renewable or clean energy capacity by 2030. While transitioning to green energy presents a substantial investment opportunity, it will take time. In the interim, fossil fuels will continue to dominate India’s energy needs until the transition is fully realized.
