India set to overtake Germany as 3rd largest economy by 2027

India economic growth

India's economic trajectory is poised for a remarkable ascent, with the International Monetary Fund (IMF) forecasting that it will surpass Germany to become the world's third-largest economy by 2027. The IMF's latest World Economic Outlook highlights India's robust economic performance, projecting a growth rate of 6.8% for the fiscal year 2024-25, followed by 6.5% in 2025-26. This upward revision reflects the country's enduring strength in domestic demand and its expanding working-age population.

Currently ranked as the world's fifth-largest economy with a GDP of $3.74 trillion, India's ascent to the top echelons of global economic powerhouses is driven by factors such as its burgeoning labor force, technological advancements, and increasing capital investment. A Goldman Sachs report forecasts that India is on track to surpass the United States by 2075, becoming the world's second-largest economy after China. This optimistic outlook underscores India's potential to leverage its demographic dividend and emerge as a major player in the global economy.

India's economic transformation is underscored by its improving per capita GDP ranking, climbing from 153 in 2018 to 144 in 2023. This progress reflects the country's strides in innovation and technology, key drivers of productivity and economic growth. Santanu Sengupta, Goldman Sachs's chief India economist, emphasizes the importance of innovation and enhancing worker productivity in sustaining India's economic momentum.

The Reserve Bank of India echoes this sentiment, emphasizing the need for sustained growth of 8-10% per annum to fully capitalize on the demographic dividend that began accruing in 2018 and is projected to last until 2055. Achieving this growth trajectory requires concerted efforts to bolster macro fundamentals, ensure price stability, and foster a conducive environment for investment and innovation.

IMF officials, including Krishna Srinivasan, director of the Asia and Pacific Department, commend India's macroeconomic fundamentals and positive growth trajectory. Srinivasan highlights the pivotal role of investment in driving growth, particularly in the public sector, underscoring India's potential as a key driver of economic expansion in the Asia-Pacific region.

India's economic resilience and upward trajectory are further underscored by its robust performance amid global economic challenges. The IMF notes India's substantial positive growth surprises, driven by robust domestic demand, particularly in emerging Asian economies. This resilience positions India as a beacon of economic stability and growth in an increasingly uncertain global landscape.

As India continues on its path to economic prominence, sustained investment in infrastructure, education, and innovation will be critical to unlocking its full potential and fostering inclusive growth. With steadfast commitment to economic reform and development, India is poised to assume a central role in shaping the future of the global economy.