The Centre for Economics and Business Research (CBER) recently released a report forecasting that India will reclaim its position as the world’s fifth-largest economy by 2025, surpassing the UK. Further, the report suggests that India will rise to the third position by 2030. CBER, a UK-based company, provides independent economic predictions for both public and private enterprises.
Key Findings in the CBER Report
According to the CBER report, the Indian economy is predicted to grow by 9% in 2021 and 7% in 2022. This projected growth pattern will see India becoming the world’s third-largest economy by 2030. The country is expected to overtake the UK in 2025, Germany in 2027, and Japan in 2030.
Moreover, the forecast suggests that China will surpass the USA to become the world’s biggest economy in 2028, five years earlier than previous estimates. This change is attributed to the contrasting recovery rates of the two countries from the Covid-19 pandemic. Until the early 2030s, Japan is predicted to retain its position as the world’s third-biggest economy, after which it will be overtaken by India. This shift will push Germany from its fourth position to fifth.
The Current Economic Scenario in India
In 2019, India had surpassed the UK to become the fifth-largest economy globally. However, in 2020, the country was relegated to the sixth spot. The five economies currently ahead are the USA, China, Japan, Germany, and the UK.
Before the Covid-19 crisis, India’s economy had already been losing momentum. In 2019, the GDP growth rate dropped to a low of 4.2%, the lowest in more than a decade. This slowing growth resulted from several factors including a fragile banking system, adjustments to reforms such as demonetisation and the introduction of GST, and a slowdown in global trade.
Furthermore, the Q2 GDP in 2020 was 23.9% below its 2019 level. This data indicates that nearly one-fourth of India’s economic activity was wiped out due to declining global demand and the collapse of domestic demand caused by strict national lockdowns.
Suggestions for Economic Recovery
The report suggests that the speed of economic recovery will be directly linked to the progression of the Covid-19 pandemic, both domestically and internationally. As the majority of the world’s vaccines are manufactured in India, coupled with a 42-year-old vaccination programme (Universal Immunisation Programme) targeting 55 million people annually, the country is in a better position than many developing nations to efficiently roll out vaccines next year.
In the medium- to long-term, reforms like the 2016 demonetisation and recent controversial efforts to liberalise the agricultural sector could yield economic benefits. However, since the majority of the Indian workforce is employed in agriculture, these reforms need to be implemented gradually, balancing efficiency enhancements with short-term income support.
Lastly, the existing infrastructure bottlenecks in India imply that investments in this area could unlock significant productivity gains. Hence, the future economic outlook is closely tied to the government’s approach to infrastructure spending.
