The most important challenge for India, according to S&P Global Ratings, which predicts that the country will become the third-largest economy by 2030, will be to establish itself as a global manufacturing hub.
Ratings agency claims that "developing a strong logistics framework will be key in transforming India from a services-dominated economy into a manufacturing-dominant one" in their most recent Global Credit Outlook.
According to S&P, in order for India to fully utilize its labor market potential, the country must improve the skills of its workforce and encourage more women to join the workforce.
In the second quarter of FY24, the participation rate of females in India's urban labor force surpassed 24% for the first time. The female jobless rate fell to its lowest point in four years, according to data released last week.
If these two initiatives are successful, India would be able to reap the benefits of its large population. In the coming years, India's high-growth startup ecosystem, particularly in the areas of consumer and financial technology, may be propelled by an expanding domestic digital market, according to S&P.
The car industry is also anticipated to play a major role in driving growth.
Earlier this month, S&P revised its growth prediction upward, positioning India to outpace all major economies over the next three years.
Economists in India increased their full-year projection beyond the 6.5% predicted by the central bank due to the country's faster-than-expected economic growth of 6.7% in the second quarter. In fiscal 2024 and FY25, the Indian economy is expected to rise 6.4%, according to S&P Global Ratings.
According to S&P, "many emerging markets (EMs) are bound to navigate the challenging global macroeconomic backdrop in 2024 better than their peers." Some structural trends that these EMs can use to their advantage include energy transition (indonesia, Chile, and the Philippines), near shoring (in Mexico, India, and Vietnam), and other similar initiatives. According to S&P, the Indian economy is expected to gain steam in FY26, and by FY27, growth will have accelerated to 7%.