In the next 10 years, India would overtake Japan & Germany to be the third largest economy in the world only if India is focused on bringing reforms and improving the social sector, said the British brokerage firm HSBC. It said, the transition would be much faster based on PPP (Purchasing Power Parity) basis.
Fact Story of India’s Economy
HSBC estimates that India will be a $7 trillion economy by 2028, while Germany will have a GDP of $6 trillion or less and for Japan, $5 trillion.
India today has a $2.3 trillion GDP and is world’s fifth largest economy.
The report also pointed out that India’s growth story would be very different from China’s led by huge domestic consumption by its 550 million consumers and that it would still be services led economy with a major push required for Manufacturing and agriculture sectors to maintain current contribution levels.
Major highpoints of this growth would be high investment and capital goods flows as the focus on manufacturing increases and Indian consumer forcing foreign brands to turn “glocal” that would have jobs for skilled people in domestic and international markets.
On reforms, the brokerage firm said, “there are limits to one off reforms and India needs an ecosystem of continuous change.”
Pointing out to GST, it said that the informal sector which employs 90% of the working population would respond to higher taxes either by layoffs or shutting down leading to economic slowdown.
The report called out on social sector, “Spending on health & education is not just desirable for its own (India) sake, but is also central to economic growth and political stability”.
The firm added that India needs to improve on ease of doing business and also said that India’s GDP growth would be lower in FY2017-18 due to introduction of Goods & Services Tax (GST) but would recover in FY2018-19.
Concerns around jobless growth the report pointed out that e-commerce sector will create roughly 12 million formal jobs over next 10 years which is half of the 24 million jobs shortage.
“India needs to broaden its specialization (beyond IT in business and cricket in sports) if it wants to run harder and fly higher”, it said.