New Delhi: India will this year overtake the UK to become the world's fifth biggest economy, and is poised to surpass Japan to be the third largest in 2025, IHS Markit said in a report on Friday.
Following the re-election of the BJP government led by Prime Minister Narendra Modi to a second term of office in May 2019, the Finance Ministry has published an economic roadmap to 2025 in its latest annual Economic Survey.
The key goal is to transform India from a $3 trillion economy in 2019 to a $5 trillion economy by 2025, lifting India into the ranks of the world's upper-middle-income countries, it said.
"IHS Markit estimates that India will overtake the UK to become the world's fifth largest economy in 2019, and forecasts that Indian GDP will reach $5.9 trillion in 2025, surpassing Japanese GDP to make India the world's third-largest economy," the report said.
Also, the size of the Indian consumer market is forecast to increase from $1.9 trillion in 2019 to $3.6 trillion by 2025.
"As India continues to ascend in the rankings of the world's largest economies, its contribution to global GDP growth momentum will also increase. As the size of its consumer market continues to grow at a rapid pace, India will also play an increasingly important role as one of the Asia-Pacific region's major economic growth engines, helping to drive Asian regional trade and investment flows," IHS said.
But to achieve this, the country's new economic roadmap highlights the importance of creating a virtuous cycle of investment, savings and exports in order to sustain rapid economic growth over the next five years.
The role of investment is seen as a critical enabler for innovation, rapid productivity growth and new technology, helping to boost jobs growth. The roadmap described in the latest Economic Survey highlights the importance of creating a favourable ecosystem for private investment, particularly in the new economy.
IHS said accelerating the development of new economy startups and growing new unicorns is a critical strategy for creating value-added and skilled jobs growth.
"Despite significant achievements in new infrastructure construction during PM Modi's first term, rapid infrastructure development in key sectors such as transport and power infrastructure remain important priorities, as well as reducing the regulatory burden of government red tape," it said.
India was ranked 77 out of 190 countries that are included on the World Bank's Ease of Doing Business Index for 2019.
The Economic Survey highlights the importance of reforms to the legal system, citing the World Bank's Ease of Doing Business Report, which ranks India 163rd in the world for contract enforcement.
It recommends the hiring of additional judges to rapidly reduce the number of unfilled vacancies and clear long backlogs in the court system.
Another important reform that is highlighted as a priority in the Economic Survey is changing labour market law to remove restrictive labour regulation.
"However, although India still lags behind other large emerging markets such as Turkey (43rd), China (46th) and Mexico (54th) on this ranking, India has made remarkable progress in improving its ranking compared with its ranking at 142nd out of 189 countries in the Ease of Doing Business ranking for 2015," IHS said.
Moreover, the increase in India's total population between 2015 and 2050 is projected at around 350 million persons, creating significant fiscal challenges for the government in order to deliver adequate physical infrastructures such as electricity, sanitation, affordable housing and public transport.
At the same time, India's population growth rate is also projected to slow rapidly over the next two decades, resulting in gradual ageing of the population, bringing additional fiscal challenges relating to healthcare, pensions and social welfare for senior citizens.
"Despite the wide range of economic challenges facing the nation, the economic outlook looks positive for the second term of the Modi-led BJP government, with GDP growth forecast by IHS Markit to average around 7 per cent per year over the 2019-2023 period," it added.