India to become world’s third-largest economy by 2023
India is set to overtake Japan and Germany to become the world’s third-largest economy and Asia’s second largest, with a GDP of $7.3 trillion by 2030, according to the latest S&P Global Market Intelligence report.
“After two years of rapid economic growth in 2021 and 2022, the Indian economy has continued to show sustained strong growth during the 2023 calendar year,” S&P said in its most recent Purchasing Managers’ Index (PMI).
Currently the world’s fifth largest economy, India’s GDP is expected to grow 6.2%-6.3% in the fiscal year ending in March 2024, being the fastest-growing major economy this fiscal year. India’s economy grew by 7.8% in the April-June quarter.
“The near-term economic outlook is for continued rapid expansion during the remainder of 2023 and for 2024, underpinned by strong growth in domestic demand,” S&P Global said.
The analyst firm pointed to an increase in foreign direct investment into India over the past decade as one reason for India’s buoyant economy, helped a young workforce and rising urban household incomes.
“India’s strong FDI inflows have been boosted by large inflows of investments from global technology [multinationals] such as Google and Facebook that are attracted to India’s large, fast-growing domestic consumer market, as well as a strong upturn in foreign direct investment inflows from manufacturing firms,” it said.
India’s GDP become larger than that of both the UK and France in 2022.
“India’s nominal GDP measured in [US dollars] is forecast to rise from $3.5 trillion in 2022 to $7.3 trillion by 2030. This rapid pace of economic expansion would result in the size of the Indian GDP exceeding Japanese GDP by 2030, making India the second largest economy in the Asia-Pacific region,” it said.
S&P Global said the long-term outlook for the Indian economy is supported by a number of key growth drivers. “An important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. The rapidly growing Indian domestic consumer market as well as its large industrial sector have made India an increasingly important investment destination for a wide range of multinationals in many sectors, including manufacturing, infrastructure and services,” it said.
The S&P report added that the digital transformation India is experiencing is expected to accelerate the growth of e-commerce, changing the retail consumer market landscape over the next decade.
“By 2030, 1.1 billion Indians will have internet access, more than doubling from the estimated 500 million internet users in 2020,” it said. “The rapid growth of e-commerce and the shift to 4G and 5G smartphone technology will boost home-grown unicorns.
“This 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 to services industries such as banking, insurance, asset management, health care and information technology.”
India’s income tax payers to shift to the new tax regime
About 70% of personal income taxpayers are expected to shift to the new low tax regime, according to Central Board of Direct Taxes (CBDT) chairman Nitin Gupta.
He said around 60% of corporate income is already collected through the low tax rate regime, adding that in the current financial year (as of 9 October) 21.8% more tax had been collected than in the same time a year ago.
Gupta said that about 60-70% of the individual taxpayers will likely shift to the new personal income tax regime. Even if one’s tax is deducted as per the new regime by the employer, the taxpayer can choose between the old and the new regime at the time of filing returns, said Gupta. He added that corporations are using the new regime introduced for them in 2019, with lower tax rates and without tax exemptions.
“The last data I had was that there was shift to the extent of 60% of (corporate) profits to the new tax regime in FY23. That is reflected in our corporate tax collection,” Gupta said.
He said India is also working with G20 nations for automatic exchange of data on undisclosed overseas real estate assets held by residents of these nations as the current arrangements are more focused on sharing of financial data.
Investigations on many cases of undisclosed overseas assets are progressing, the Chairman said, when asked about the department’s action on information that has come out in leaks such as the Panama and Paradise papers.
