India’s growth trajectory will rise to the third spot by 2037 from the current fifth spot on the World Economic League Table, according to Cebr. The Centre for Economics and Business Research said that over the next five years, India’s annual rate of GDP growth is expected to average 6.4%, after which growth is expected to average 6.5% in the subsequent nine years.
According to the Cebr report, India’s estimated PPP-adjusted GDP per capita is $8,293 in 2022– classifying it as a lower middle-income country. PPP GDP is gross domestic product converted to international dollars using purchasing power parity rates.
While the pandemic had a devastating impact on India’s economy in absolute terms with output contracting by 6.6% in FY21. However, a sharp rebound in economic activity was seen post-pandemic, fuelled by an uptick in domestic demand, resulting in GDP growing by 8.7% in the fiscal year 2021-22, making it the fastest-growing major economy in the world.
The UK-based consultancy still expects growth in the fiscal year 2022-23 to remain robust, at 6.8% amid inflation, US monetary policy, the Russia-Ukraine war, and other global uncertainties.
The consultancy report said output growth is expected to ease in the fiscal year 2023-24, however, Cebr is forecasting growth of 5.8%, as accelerating, price levels bite into domestic demand. Annual inflation in India has exceeded the target in 2022, at 6.9%, thereby above the Reserve Bank of India (RBI)’s tolerance band upper margin of 6%, according to the report.
Mentioning inflation, the report stated that it has remained lower than in most other large economies. Much of India’s current inflation rate reflects higher food prices, an erratic item but one that also accounts for a larger share of the consumer basket than in any other G20 country, Cebr added.
The reserve Bank of India (RBI) has raised interest rates to bring back inflation to its target range. According to Cebr, higher borrowing costs will weigh on public debt, especially on top of expanded infrastructure spending and targeted fiscal measures. It said that the Centre’s debt stands at 83.4% of GDP at present, with a high fiscal deficit amounting to 9.9% of GDP in 2022, and added that fiscal consolidation would be needed to ensure that debt levels do not destabilise the economy.
The Cebr takes its base data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation, and exchange rates.
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