New Delhi: (Tamsil Shahezad Khan) A recent research report by Goldman Sachs suggests that India, with its vast population of 1.4 billion people, has the potential to emerge as the world's second-largest economy by the year 2075. The report emphasizes that in order to capitalize on this opportunity, India must focus on increasing labor force participation and investing in the development and training of its workforce.
Santanu Sengupta, an economist at Goldman Sachs Research specializing in India, highlights the importance of leveraging the country's growing population by enhancing labor force participation and nurturing skilled talent. "In the coming decades, India's dependency ratio is projected to be among the lowest compared to other regional economies. This presents a unique window of opportunity for India to establish robust manufacturing capabilities, further expand its services sector, and continue investing in infrastructure," Mr. Sengupta explains.
The report also underscores India's advantageous demographic composition, with a favorable ratio of working-age individuals to children and elderly citizens. It recognizes India's progress in innovation and technology, stating, "India has made remarkable strides in these areas. While demographics play a crucial role, GDP growth will not rely solely on this factor. The key drivers will be innovation and increased worker productivity, which contribute to higher output per unit of labor and capital in India's economy."
The report predicts that capital investment will play a significant role in India's future growth. With falling dependency ratios, rising incomes, and the development of a robust financial sector, the country's savings rate is expected to rise, providing a substantial pool of capital for further investment. The report acknowledges the Indian government's efforts in facilitating this growth in recent years and suggests that the conditions are ripe for a private sector capex cycle, given the healthy balance sheets of private corporates and banks in the country.
Highlighting the challenges, the report emphasizes the need to increase India's labor force participation rate in order to effectively utilize its large population. It calls for the creation of employment opportunities and the simultaneous training and upskilling of the labor force. The report also highlights that India's demographic transition is occurring at a slower pace compared to other Asian countries, primarily due to a more gradual decline in death and birth rates.
However, the report cautions that India's potential could be at risk if its labor force participation rate does not improve. Over the past 15 years, India has witnessed a decline in labor force participation, particularly among women. The report stresses the importance of providing more opportunities, especially for women, to bolster the overall labor force participation rate and unlock India's full growth potential.
In conclusion, the Goldman Sachs report outlines India's promising prospects as the world's second-largest economy by 2075. It underscores the significance of increased labor force participation, innovation, and productivity, as well as capital investment, in driving India's future economic growth. The report emphasizes that the Indian government, in collaboration with the private sector, must take decisive steps to seize this opportunity and ensure the productive utilization of its burgeoning population.
