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Indian Economy

India to Become Fifth Largest Economy in 2025

  • 29 Dec 2020
  • 4 min read

Why in News

A recent report published by the Centre for Economics and Business Research (CBER) has predicted that India will again overtake the UK to become the fifth largest economy in 2025 and race to the third spot by 2030.

  • CBER is a UK based company that gives independent economic forecasts for public and private firms.

Key Points

  • Findings:
    • The Indian economy will expand by 9% in 2021 and by 7% in 2022.
    • This growth trajectory will see India become the world’s third largest economy by 2030, overtaking the UK in 2025, Germany in 2027 and Japan in 2030.
    • China in 2028 will overtake the USA to become the world’s biggest economy, five years earlier than previously estimated due to the contrasting recoveries of the two countries from the Covid-19 pandemic.
    • Japan would remain the world’s third-biggest economy, until the early 2030s when it would be overtaken by India, pushing Germany down from fourth to fifth.
  • Current Scenario:
    • Previously, India had overtaken the UK in 2019 to become the fifth largest economy in the world but has been relegated to 6th spot in 2020.
      • The five economies ahead are the United States, China, Japan, Germany and the United Kingdom respectively.
    • India’s economy had been losing momentum even ahead of the shock delivered by the Covid-19 crisis.
    • Slowing growth has been a consequence of a confluence of factors including fragility in the banking system, adjustment to reforms (Demonetisation, GST) and a deceleration of global trade.
    • GDP in Q2 (April-June) 2020 was 23.9% below its 2019 level, indicating that nearly a quarter of the country’s economic activity was wiped out by the drying up of global demand and the collapse of domestic demand that accompanied the series of strict national lockdowns.
  • Suggestions:
    • The pace of the economic recovery will be indistinguishably linked to the development of the Covid-19 pandemic, both domestically and internationally.
      • As the manufacturer of the majority of the world’s vaccines and with a 42-year-old vaccination programme (Universal Immunisation Programme) that targets 55 million people each year, India is better placed than many other developing countries to roll out the vaccines successfully and efficiently next year.
    • In the medium to long term, reforms such as the 2016 demonetisation and more recently the controversial efforts to liberalise the agricultural sector can deliver economic benefits.
      • However, with the majority of the Indian workforce employed in the agricultural sector, the reform process requires a delicate and gradual approach that balances the need for longer-term efficiency gains with the need to support incomes in the short-term.
    • The infrastructure bottlenecks that exist in India mean that investment in this area has the potential to unlock significant productivity gains.
      • Therefore, the outlook for the economy going forwards will be closely related to the government’s approach to infrastructure spending.


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