India in 2028: This is where we are heading; can you visualise?


India in 2028: This is where we are heading; can you visualise?

NEW DELHI: With rising financial maturity and emergence of a mass market riding demographic dividend, the Indian economy would soon chart its own course with service-led growth against an export-led China and become the third largest economy after the US and China by 2028.

India will leave France and the UK behind by 2019 itself, Bank of America-Merrill Lynch said in a note. 

By 2027, the cheapest car could cost just as much as India’s average per capita annual income compared with 2.5 times per capita annual income today and 14.5 times in 2000. India will account for 40 percent of the next billion consumers, said the report. 

By 2028, almost all farmers are expected to join the middle-income group based on $2 per capita daily income on a purchasing power parity (PPP) basis and ownership of two acres of land, and a population almost equal to the size of entire Russia would be living in urban India, said the brokerage. 

It projected crude oil prices at $68 a barrel by then, while the rupee would not depreciate more than 3 percent between now and 2028, it said. 

The global financial player expects the Modi regime to intensify reforms during the remaining period of its tenure. 

India’s growth will be driven by services, BofA-ML said, adding, India cannot replicate the export-led strategy of Asian tigers that was possible in a different world environment during the Cold War. 

It would be difficult for India to replicate South Korea’s export-driven industrialisation, as its dependence on oil imports implies India cannot depreciate its currency, it said. 

Globally, the services sector has expanded 10 percent to almost 70 percent of world GDP in last 20 years. The impact of India’s growth in global markets could be in the form of higher demand for commodities. India’s share in total world demand could rise from 4 percent in 2007 to 6 percent in 2022, it said. 

The brokerage noted that India’s financial extension has been backed by introduction of multiple financial products to promote financial efficiency and that unlike in developed markets where financial products evolve in the market, they are mostly introduced by regulators in emerging markets like India. 

“The government is trying to develop a project finance market by promoting development financial institutions and elongating tenure of bank deposits to enable long-term loans and developing a corporate bond market by increasing investment limits for foreign portfolio investors. The equity market has deepened with growth institutional intermediaries like mutual funds and FPIs in equities,” it said. 

The brokerage said the Indian economy may sustain its growth at 7 percent (conservative estimate) till 2028, compared with 7.2 percent in 2000-17, with dependency ratio falling to 46.2 percent from 52.2 percent now and 71.7 percent in 1990. Rising rate of savings should push up investment rate to 35 per cent of GDP in 2028 from 32.4 percent at present, it said. 

The government has introduced market makers to promote short-term instruments like CDs, CPs, and liberalised insurance and pension funds to introduce products at the longer end.

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