The South Asian nation will be the fastest-growing emerging market in the coming years, the rating agency said Textiles are dried in the open air at a sari factory in Rajasthan, India. © Tuul & Bruno Morandi

India is set to overtake the EU’s powerhouse, Germany, in terms of economic might by the end of the decade, the S&P Global Ratings has projected.

In its latest report, the Global Credit Outlook 2024, the rating agency predicted that the South Asian country will become the world’s third-largest economy by 2030. Currently, India is in fifth place, behind the US, China, Germany, and Japan in terms of gross domestic product (GDP), respectively, according to International Monetary Fund (IMF) data.

“A paramount test will be whether India can become the next big global manufacturing hub, an immense opportunity. Developing a strong logistics framework will be key in transforming India from a services-dominated economy into a manufacturing-dominant one,” the S&P’s report reads.

According to the agency, the digital market, primarily financial and consumer technology, and the automotive sector, are the fundamental driving forces behind India’s economic growth.

India’s growth forecast raised India’s growth forecast raised

The S&P projects that India will be the fastest-growing emerging market over the next three years, with economic growth reaching 6.4% next year and 7% in 2026. The figures, however, represent a decrease from the 7.2% recorded in the 2022-2023 fiscal year.

Last year, the S&P predicted that India would overtake Germany and Japan by 2030. However, the growth forecast presented by the agency at the time was more modest and stood at an average of 6.3% annually by the end of the decade.

At the same time, Germany, currently the world’s third-largest economy, expects its economy to contract by 0.4% in 2023 due to high inflation and energy prices. The EU’s economic powerhouse suffered a contraction in the last quarter of 2022 and the first quarter of 2023, entering a technical recession, defined as two consecutive quarters of negative GDP growth.

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