India to be 3rd Largest Upper-Middle-Class Economy by 2031: CRISIL
CRISIL, a leading market research firm, predicts that India will ascend to become the world's third-largest economy and achieve upper middle-income status by fiscal year 2031. The agency anticipates a GDP growth of 6.8% in the upcoming fiscal year following a 7.6% expansion in the current fiscal period.
According to CRISIL's India Outlook 2024 report, unveiled on March 6th, the nation's growth trajectory is expected to persist throughout the decade. This sustained momentum is driven by substantial private investments in emerging sectors, continued government expenditure on infrastructure development, ongoing reform initiatives, and the efficiency enhancements stemming from the expanding digitalization and physical connectivity.
"The next seven fiscals will see the Indian economy cross the $5 trillion mark and close in on $7 trillion at an estimated 6.7% average annual growth. By fiscal 2031, India will be the No. 3 economy and an upper middle-income country, which will be a big positive for domestic consumption. India's manufacturing sector is at a sweet spot due to high capacity utilization across key sectors, opportunities from global supply-chain diversification, thrust on infrastructure investment, the green-transition imperative and strong balance sheets of lenders", Amish Mehta, Managing Director and CEO of CRISIL Ltd, said. "Continuous reforms, enhanced global competitiveness and moving up the value chain will boost the share of manufacturing in India's GDP beyond the projected 20% in fiscal 2031", he adds.
The report highlights that private sector fixed investments, which had remained stagnant for years, are now gradually increasing with significant room for further expansion. Concurrently, government initiatives continue to stimulate growth in India's infrastructure sectors. Additionally, the report emphasizes that improved profitability and strategic deleveraging efforts have strengthened the balance sheets of Indian companies. CRISIL projects revenue growth for India Inc. to range between 9-10% in the upcoming fiscal year. Furthermore, it predicts that industrial capital expenditure in India will escalate to an average of Rs 6.5 lakh crore annually between FY 2024 and 2028, up from Rs 3.9 lakh crore in the previous five fiscal years.
"There is ample opportunity for both manufacturing and services to cater to domestic and global demand. We project manufacturing and services to grow 9.1% and 6.9%, respectively, between fiscals 2025 and 2031. Despite some growth catch-up by manufacturing, services will remain the dominant driver of India's growth", Dharmakirti Joshi, Chief Economist, CRISIL notes. The report identifies near- and medium-term challenges, which include geopolitical uncertainties, mounting global debt, an uneven global economic rebound, climate change, and technological disruptions.