India is one of the worst affected countries due to coronavirus but it'll become the world's fifth-largest economy by 2025 and the third-largest by 2030 after overtaking the UK in 2025, a UK-based think tank has said. As per the Centre for Economics and Business Research (CEBR), India will surpass Germany in terms of GDP by 2027 and Japan by 2030.
"India has been knocked off course somewhat through the impact of the pandemic. As a result, after overtaking the UK in 2019, the UK overtakes India again in this year's forecasts and stays ahead till 2024 before India takes over again," the CEBR said in an annual report published on Saturday.
CEBR's estimate suggests India's GDP per capita in 2020 was $6,284, making it a lower-middle-income country.
It said though Covid-19 delivered a major blow to the Indian economy, it was losing momentum even ahead of the pandemic due to fragile banking system, adjustment to reforms and deceleration of global trade. "The rate of GDP growth sank to a more than 10-year low of 4.2 per cent in 2019, down from 6.1 per cent the previous year and around half the 8.3 per cent growth rate in 2016."
Notably, India is the second-worst affected country after the US when it comes to Covid-19. So far, over 1.4 lakh people have already died with a total caseload of over 1 crore. However, it equates to around 10 deaths per 100,000, significantly lower figure than much of Europe and the Americas.
As Covid-19-induced lockdowns stopped most economic activities in India, it' April-June quarter GDP took a massive hit of 23.9 per cent below its 2019 level. The economic shock was so strong that nearly a quarter of the country's economic activity was wiped out by the drying up of global demand and the collapse of domestic demand. Only the agricultural sector, buoyed by a bountiful harvest, remained largely unaffected and emerged as an important driver of India's economic recovery.
As restrictions were gradually lifted, many parts of the economy were able to spring back into action, although output remains well below pre-pandemic levels. India recorded a GDP contraction of 7.5 per cent in Q2.
"The pace of the economic recovery will be inextricably linked to the development of the COVID-19 pandemic, both domestically and internationally," the CEBR report said.
In the recovery front, it said India is better placed than other developing countries to roll out the vaccines successfully and efficiently in 2021. CEBR based this analysis on the fact that India is the manufacturer of the majority of the world's vaccines and has a 42-year-old vaccination programme that targets 55 million people each year.
It said in the medium to long-term, reforms such as the 2016 demonetisation and more recently the controversial efforts to liberalise the agricultural sector can "deliver economic benefits".
It maintained that the government's stimulus spending in response to the COVID-19 crisis has been significantly more restrained than most other large economies, although the debt to GDP ratio did rise to 89 per cent in 2020.
The CEBR report said India will have to boost spending on infrastructure in future. "The infrastructure bottlenecks that exist in India mean that investment in this area has the potential to unlock significant productivity gains. Therefore, the outlook for the economy going forwards will be closely related to the government's approach to infrastructure spending."
The Indian economy will expand by 9 per cent in 2021 and by 7 per cent in 2022, it said. "Growth will naturally slow as India becomes more economically developed, with the annual GDP growth expected to sink to 5.8% in 2035," says the report.