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India to become the third largest economy

A report by Bank of America Merrill Lynch says that in the next decade, India will overtake Japan to become the third largest economy. The factors that will enable this are reduced dependency on other nations, financial maturity, and higher income and affordability, the Economic Times reported.

The report also adds that India is likely to become the world’s fifth largest economy by 2019.

As per data available in the report, India is likely to cross Germany and Japan in nominal GDP by 2028, assuming that the nation witnesses a 10% growth every year for the next 10 years.

There are three factors that will enable India to achieve this goal. Firstly, reduced dependency ratios are expected to raise saving and investment rates. This is likely to fund 7% real growth.

Secondly, financial maturity, due to financial liberalization and inclusion, should continue to lower lending rates structurally.

Finally, increasing incomes and affordability will likely underpin the emergence of mass markets, supporting an expected 7% real GDP growth.


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