India may become upper-middle income country by FY31: S&P

New Delhi: India is likely to become the third-largest economy and transition to the upper-middle-income category by the financial year 2030-31, if an average annual GDP growth of 6.7 per cent is maintained till the end of the decade, S&P Global said in a report on Thursday.

As per S&P Global Market Intelligence projections, the size of India’s nominal gross domestic product (GDP) would nearly double to over $7 trillion by fiscal 2030-31 from $3.6 trillion in the financial year ended March 2024.

“This would make India the third-largest economy in the world, raising its share in global GDP from 3.6 per cent to 4.5 per cent and lifting its per-capita income to the upper-middle-income group,” the rating agency said in its ‘India Forward: Emerging Perspectives’ report.

India is currently the fifth largest economy behind the United States, China, Japan and Germany. With a per capita income of around $2,400, India is categorised as a lower-middle-income country, as per the World Bank's classification, and has been in this category since 2007. To become an upper-middle-income country, the per capita income would have to be in the range of $4,466- $13,845.

“India’s medium-term prospects are healthy and filled with opportunities in multiple sectors including trade, agriculture, and AI, likely structural reforms and growing energy demands,” said Abhishek Tomar, Head- S&P Global India Leadership Council.

The Indian economy posted a robust expansion of 8.2 per cent in the financial year 2023-24. India has been the fastest growing major economy in the past few years.

“We expect India’s real GDP to grow 6.8 per cent in the current fiscal year, moderating from a high base in fiscal 2023-24,” S&P Global said.

On the central bank’s monetary policy, the report noted: “the transmission of the Reserve Bank of India’s (RBI’s) rate hikes between May 2022 and February 2023 is underway and likely to modestly weigh on demand in fiscal 2024-25.”

The report further noted that India’s external buffers are resilient compared with those of other nations, thanks to the country’s sharply narrowed current account deficit (0.7 per cent of GDP in FY24 against 2 per cent in FY23), strong foreign exchange reserves of over $650 billion and ongoing fiscal consolidation.