By 2031, India will overtake Japan as the world’s third-largest economy after the United States and China, according to a recent report by BofA Securities.
Bank of America’s investment banking sector previously predicted that it would happen in 2028, but said on Monday that the economic shock from Covid-19 would delay the timeline by three years.
BofA Securities economists Indra Neil Sengputa and Earthta Gudwani said, “India is expected to emerge as the world’s third-largest economy in 2031 / FY32 before 2028 due to the shock of Covid 19.”
Researchers pointed out that if India grows at 9% annually, it should reach Japan’s nominal GDP on a dollar basis in 2031. Real GDP growth is about 6%, average inflation is 5% and depreciation is 2%. When growth reaches 10%, India could surpass Japan by 2030, the report said.
India suffered an economic crisis due to last year’s economic crisis A long blockade to slow the spread of the coronavirus outbreak.. Millions of jobs have been lost, many of which have been lost forever. While the economy is recovering, rating agency S & P said: India faces a permanent loss of about 10% of its economy output Compared to the pre-pandemic route.
Nevertheless, according to a BofA Securities report, the structural impetus for economic growth has been strengthened. This includes deepening financial maturity, the emergence of mass markets due to rising incomes, and the next demographic dividend. Country growth is accelerating due to lower fertility and mortality.. A mass market is a market where goods are mass-produced for a large number of people.
Declining fertility means that as we get older, fewer people support us. This trend, also known as the decline in dependents, allows countries to direct scarce resources to other regions and accelerate development. BofA Securities said India’s dependent ratio would decline within 10 years due to increased labor supply. It is expected to help maintain high savings and return on investment.
The report predicts that India’s skilled workforce will grow as the large Covid-related job and income losses reverse when things return to normal, partly due to increased employment in the service sector. Did. The credit-to-GDP ratio, which is a substitute for financial maturity, is also expected to rise over a decade, while the emergence of the mass market is set to push down commodity prices.
According to the report, the two new catalysts are expected to support structural changes that could drive India’s economic growth. First, the Reserve Bank of India has accumulated national foreign exchange reserves. This could help stabilize the Indian Rupee and prevent a significant depreciation of the currency during a global shock. It will also increase portfolio inflows and reduce borrowing costs for Indian companies.
“In addition, the sustained easing of the Reserve Bank of India has ultimately lowered real lending rates, which have been a drag on growth since 2016,” said economists. “The main beneficiaries of India’s growth story.” We continue to look at finance as a stakeholder. “