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India projected to become second largest economy

The country's GDP is expected to expand dramatically, driven by favorable demographics, innovation, and increasing worker productivity.

A Goldman Sachs Research has projected that India will become the world’s second-largest economy by 2075. The GDP of the country with 1.4 billion people is expected to expand dramatically, according to the research.

“Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies,” Santanu Sengupta, Goldman Sachs Research India economist, said in an interview published on the company website.

He provided insights into India's economy, demographic factors influencing GDP growth, and the country's aspirations for green energy. According to him, while favorable demographics contribute to India's economic growth, “innovation and increasing worker productivity are going to be important for the world’s fifth-biggest economy.”

Apart from productivity, Sengupta also highlighted the significance of capital investment for India's future growth. With the government having contributed to the capital expenditure (capex) in the recent past, he believes that the conditions are right for the private sector in India to contribute to the capex. This capital expenditure will in return help mutually grow labor productivity, he emphasized.

Sengupta highlighted that the dependency ratio, which is the non-working-age population that is dependent on the working-age population, will be the lowest among large economies for approximately the next 20 years. According to him, it will provide an opportunity for India to focus on manufacturing capacity, services growth, and infrastructure development.

Since India's economy is primarily driven by domestic consumption and investments, Sengupta reiterated how exports and imports play out for India. Historically, net exports, have acted as a drag on growth, however, recently progress has been seen through increased services exports, which help cushion the deficit.

Sengupta also stated that transitioning to green energy presents a substantial investment opportunity for India, but he acknowledged that fossil fuels will continue to dominate the energy mix until the transition is complete.

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