Context: India is likely to overtake Japan as Asia’s second-largest economy by 2030 when its GDP is also projected to surpass that of Germany and the U.K. to rank as the world’s No.3 said IHS Markit in its report.

Current State of India’s Economy

• Currently, India is the sixth-largest economy, behind the U.S., China, Japan, Germany and the U.K.
• India’s GDP at current prices stood at USD 694.93 billion in the first quarter of FY22, as per the provisional estimates of gross domestic product for the first quarter of 2021-22.
• India is the fourth-largest unicorn base in the world with over 21 unicorns collectively valued at USD 73.2 billion.

Key Points

• In terms of value, the size of the Indian economy stood at USD 2.7 trillion in 2021, which is projected to grow to USD 8.4 trillion by 2030.
• This boom is enough to overtake Japan, making India the second largest economy in the Asia-Pacific region by 2030.
• India’s growth rate is projected to be 8.2% in 2021-22, compared to a decline of 7.3% in the previous fiscal.
• However, the momentum of the current financial year(FY) will continue in 2022-23 as well and India will achieve 6.7% growth.

Role of Different Sectors

• The manufacturing, infrastructure and services sector along with the e-commerce sector have a big role to play in boosting India’s growth rate.
• Not only this, due to increasing digitization, the e-commerce market will become bigger in the coming times.
• According to a report, 1.1 billion Indians will have internet by 2030, in 2020 this number was 500 million.

Growth Rate

• Overall the future of the Indian economy looks strong and stable, making it the fastest growing country in the country for the next decade.
• In the long term also, technological developments like infrastructure sector and startups will play a big role in sustaining India’s rapid growth rate.
• Being one of the world’s fastest-growing economies will make India one of the most important long-term growth markets for multinationals in a wide range of industries, including manufacturing industries such as autos, electronics and chemicals, and services industries such as banking, insurance, asset management, healthcare and information technology.

Middle Class Support

• India gets the most help from its vast middle class, which is its main consumer force.
• Indian consumer spending will also double in the next decade. This could increase from USD1.5 trillion in 2020 to USD3 trillion in 2030.

FDI Inflows

• The large increase in Foreign Direct Investment (FDI) inflows to India that has been evident over the past five years is also continuing with strong momentum in 2020 and 2021.
• It is being boosted by large inflows of investments from global technology Multinational Companies (MNCs) such as Google and Facebook that are attracted to India's large domestic consumer market.

Road Ahead

• The recovery of the Indian economy in FY22 totally depends on how steadily household incomes recover and activity in the informal sector and smaller firms normalise. 
• Participation of women in the workforce is a key driver of India's growth. Therefore India should increase women's participation in the workforce.
• However, infrastructure building or revival of the investment cycle, in general, would require the private sector to also start contributing.