At current rate, India to become 3rd largest economy by FY28: SBI Research

The Indian economy continues to enjoy a period of sustained goldilocks. There is now an increasing consensus that India’s GDP in Q1FY24 is likely to surpass 8% (SBI projection at 8.1% with an upward bias), thus pushing India’s GDP growth to beyond 6.5% for FY24. As per SBI, in a world that is ravaged by uncertainties, 6.5%-7.0% growth is the new normal.

The path taken by India since 2014 reveals that India is likely to get the tag of the 3rd largest economy in 2027 (or FY28) based on actual GDP data as on March 2023, a movement of 7 places upwards since 2014 when India was ranked 10th and 2 years earlier than our previous forecast of 2029.

India should surpass both Japan & Germany in 2027 at the current rate of growth. This is a remarkable achievement by any standards. Interestingly, the incremental increase by India between 2022-2027, is more than the current size of Australia’s economy at $1.8 trillion! At this rate, India is likely to add $ 0.75 trillion in every 2 years, implying that India is all set to touch $20 trillion by 2047, at least on current numbers. India’s global share in GDP will cross 4% by 2027.

Behind this surge, India needs to grow by CAGR of 8.4% till 2027 (in dollar terms). This translates into 11.0-11.5% nominal GDP growth per annum (in Rs terms), which is eminently achievable with a 6.5-7% growth rate.

State-wise estimate indicates that at least two Indian states, Maharashtra and Uttar Pradesh, will break the $500 billion mark in 2027 (or FY28) when India achieves the 3rd place in global economy. The GDP size of major Indian states in 2027 will be more than the size of some of the Asian and European countries like Vietnam, Norway and so on.

In coming days as macroeconomic prospects steadily improve, India will dynamically seek fuller expression of its full potential and a transformative change in its global position. Additionally, the recent visits of the PM mark significant long term economic gains for India in areas of onshoring of chip manufacturing, defence relationship, climate transition & climate finance, trade disputes and creation of special economic zones. Development will have a cascading impact on economic growth in India and extended neighbourhood.