SBI RESEARCH

ECOWRAP
INDIA SET TO BECOME 3RD LARGEST ECONOMY BY 2029: Issue No. 31, FY23
INDIA SURPASSED THE SIZE OF UK ECONOMY IN DECEMBER 2021 ITSELF Date: 03 Sep 2022

India’s Share in World GDP (%)

India’s GDP growth in Q1FY23 was 13.5%. At this rate, India is likely to be 4.5%

the fastest growing economy in the current fiscal. Interestingly, even as 4.1%
4.0%
estimates of India’s GDP growth rate for FY23 currently range from 6.7%
to 7.7%, we firmly believe that it is immaterial. In a world that is ravaged 3.5%
3.3% 3.2%
3.3%
3.4%

3.1% 3.1%
by uncertainties, we believe 6% -6.5% growth is the new normal. 3.0% 2.8%
3.0%

Nevertheless, we make a passionate urge to update the IIP basket that is 2.4%
2.5%
composed of a 2012 set of products and is hopelessly outdated. For ex-
ample, IIP basket does not contain handset exports that are now produced 2.0%

2022 P

2023 P

2024 P

2025 P

2026 P

2027 P
2017
2013

2014

2015

2016

2018

2019

2020

2021
by companies like Foxconn in India. Separately, the steel production by
select companies has undergone locational shift which are not a part of Source: IMF, SBI Research

the IIP sample. Nokia’s handset manufacturing facility at Chennai has India vis-à-vis UK (Nominal GDP in $ Mn)
closed down post 2014. Hilariously, the facility is now producing 5G Radio 900000

850000

sets. We believe that manufacturing growth in India will see an upward 800000

750000
revision once this is done. 700000

Meanwhile, India has undergone a large structural shift since 2014 and is 650000

600000

now the 5th largest economy. Interestingly, India had surpassed UK as 550000

500000
the 5th largest economy as early as December 2021 itself and not 450000

recently as is being claimed. The share of India’s GDP is now at 3.5%, as 400000

09-2020
03-2019

06-2019

09-2019

12-2019

03-2020

06-2020

12-2020

03-2021

06-2021

09-2021

12-2021

03-2022

06-2022
against 2.6% in 2014 and is likely to cross 4% in 2027, the current share India UK

of Germany in global GDP!

Source: CEIC, SBI Research
The path taken by India since 2014 reveals India is likely to get the tag of
Top 10 Economies, Nominal GDP ($ Mn)
3rd largest economy in 2029, a movement of 7 places upwards since 2014 2014 2022 P
when India was ranked 10th. India should surpass Germany in 2027 and Rank Country
Nominal GDP
Share (%) Rank Country
Nominal GDP
Share (%)
($ Mn) ($ Mn)
most likely Japan by 2029 at the current rate of growth. This is a 1 US 17551 22.1% 1 US 26695 24.1%
2 China 10524 13.3% 2 China 21865 19.8%
remarkable achievement by any standards. 3 Japan 4897 6.2% 3 Japan 5291 4.8%
In coming days India is likely to be the beneficiary as China slows down 4 Germany 3890 4.9% 4 Germany 4565 4.1%
5 UK 3089 3.9% 5 India 3894 3.5%
in terms of new investment intentions. Global tech major Apple’s recent 6 France 2852 3.6% 6 UK 3687 3.3%
decision to shift part production of its flagship iPhone 14 model for 7 Brazil 2456 3.1% 7 France 3086 2.8%
8 Italy 2163 2.7% 8 Canada 2362 2.1%
worldwide shipping from India, with a negligible time lag of a few weeks 9 Russia 2049 2.6% 9 Italy 2169 2.0%

post its slated launch on September 7, bears testimony to such an 10 India 2039
Source: IMF WEO; SBI Res ea rch; For Indi a , i t i s FY2023
2.6% 10 Brazil 1980 1.8%

optimism! The move by Apple, the most recognisable face of tech infused
innovation in the last two centuries, that captures aspirations of an India’s Transition since 2014
upwardly mobile population should open the flood gates for other major Rank Year
conglomerates to follow suit. 10th 2014
A broad-based growth of empowerment will also lift India's per capita
7th 2015
income from current levels and this could also as a force multiplier for a
6th 2019
better tomorrow.
At the beginning of 21st century, China embarked on an accelerated 5th 2022
growth path occupying the second largest economy tag. We believe, with 4th 2027 P
right policy perspective and realignment in global geopolitics our current 3rd 2029 P
estimates might even undergo an upward revision!
Source: IMF; SBI Research

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