India to become third largest economy in the world by 2030, GDP to grow 7%: S&P Global

India will become the third largest economy by 2030, and the country's GDP is likely to grow from 6.4% in 2023 to 7% in 2026, a report released by S&P Global said on Tuesday. India is currently the fifth largest economy in the world behind the US, China, Germany and Japan.

"We see India reaching 7 percent in 2026-27 fiscal...India is set to become the third-largest economy by 2030, and we expect it will be the fastest-growing major economy in the next three years," S&P said.

According to the "Global Credit Outlook 2024" by S&P, India is projected to be the fastest-growing emerging market globally. However, the critical challenge lies in determining whether the country can successfully evolve into the next major global manufacturing hub.

The report further highlighted that India's growth is projected to be 6.4% in the fiscal year 2023-24, a decline from the 7.2% recorded in the preceding financial year. The rating agency anticipates that the growth rate will persist at 6.4% in 2024-25 before experiencing an increase to 6.9% in the subsequent year and reaching 7% in 2026-27.

"A strong logistics framework will be key in transforming India from a services-dominated economy into a manufacturing-dominant one," it said.

The rating agency underscores the significance of India emerging as a global manufacturing hub, underscoring a substantial opportunity for the country. It stresses the importance of establishing a strong logistics framework to shift India's economic landscape from service-oriented to manufacturing-dominated.

To unleash the potential of the labour market, S&P recommends enhancing the skills of workers and boosting female participation in the workforce. The agency is of the opinion that success in these domains will empower India to leverage its demographic dividend.

"Success in these two areas will enable India to realise its demographic dividend," it said.

S&P highlights that India's thriving domestic digital market has the potential to fuel the growth of the high-potential startup ecosystem, especially in financial and consumer technology, in the coming decade.

S&P's perspective comes just a few days after India experienced a quicker-than-anticipated GDP growth rate of 7.6% for the September quarter.