‘India Likely To Be $7 Trillion Economy By... - Brokerage Lists Key Drivers

India is poised to reach a significant economic milestone, with projections indicating that the country could achieve a $7 trillion GDP by FY31.

This ambitious forecast stems from a combination of structural tailwinds, policy initiatives, and favorable macroeconomic conditions, according to a detailed macroeconomic report by Fisdom Research.

Key Drivers Fueling India’s Growth
1. Consumption and Investment Growth
India’s growth story is anchored in its rising consumption and steady investment flows. The financialisation of savings has gained momentum, with household equity holdings currently at only 5%, offering substantial room for expansion. Additionally, consumption trends are bolstered by increasing urbanisation and higher disposable incomes.

2. Policy Reforms
India has implemented key supply-side reforms over the past decade that are now yielding results. Programs such as the Production Linked Incentive (PLI) scheme, Real Estate (Regulation and Development) Act (RERA), and the Gati Shakti National Master Plan have enhanced infrastructure and manufacturing capabilities, creating an enabling environment for sustained growth.

3. Surge in Capital Expenditure
Public capital expenditure has surged significantly, growing from ₹2 trillion in FY15 to an estimated ₹11 trillion in FY25. This trend is expected to continue, supporting infrastructure development and private sector participation. Corporate capital expenditure is also at a 12-year high, with capacity utilization reaching approximately 75%.

4. Housing Upcycle
India’s housing sector is witnessing a strong uptrend, with a projected compound annual growth rate (CAGR) of 10% over the next five years compared to 5% in the previous decade.

5. Services Sector Expansion
The services sector, particularly IT and professional consulting, continues to drive India’s export growth. Services exports have surged from $53 billion in 2005 to $338 billion in 2023, capturing 4.6% of the global market. Diversification into emerging sectors, such as fintech and digital services, is expected to sustain this momentum.

6. Corporate Deleveraging
Corporate balance sheets are healthier than ever, with leverage ratios at 15-year lows.

Comparisons to China’s Economic Ascent
India’s current trajectory is often compared to China’s rise in the mid-2000s. In 2007, China surpassed the UK to become the world’s fifth-largest economy, later overtaking Germany and Japan. India, which recently displaced the UK, is projected to surpass Germany and Japan by 2028, highlighting its strong growth trajectory.

Opportunities and Challenges

Opportunities:
Digital Transformation
With increasing agricultural incomes and government support, rural demand is expected to grow robustly, complementing urban consumption.
Middle-Income Transition, India is on course to achieve a per capita income of $4,500 by FY31. 

Challenges:
Geopolitical tensions, inflationary pressures, and unfavorable global financial conditions pose risks to growth.
Import-Export Imbalance
Urban Demand Moderation

The Road Ahead
India’s services sector is expected to sustain its growth momentum, driven by robust domestic and international demand. However, manufacturing faces challenges from rising cost pressures, including inflationary trends in input costs. Strategic policy interventions and easing inflation could help stabilize growth across both sectors, ensuring balanced and resilient economic expansion.

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