Global financial services major Standard Chartered has said India is likely to become the third largest economy by 2030, behind China and the USA, adding that the world is in the midst of an economic "super-cycle".
A super-cycle is a period of historically high global growth, lasting a generation or more, driven by opening up of new markets, increasing trade, high rates of investment, urbanisation and technological innovation.
India is likely to be the third largest economy with a GDP size of $15 trillion by 2030, says Standard Chartered's Super-Cycle Report. China with a GDP of $53.8 trillion is projected as the biggest economy, followed by the US at $38.5 trillion.
Though slowdown in some major emerging economies is a concern, a modest set of reforms could trigger a growth revival in several large emerging economies, including China, India, Indonesia, Nigeria and Brazil, it said.
Indian policy makers appear to be responding to the concerns, with monetary policy now firmly signalling an anti-inflation stance and measures being taken to address the funding of the large current account deficit (CAD), the report said.
"We also remain optimistic that the focus on reforms will pick up speed once the election cycle is out of the way," it added. General elections are due in May 2014.
Stating that "the super-cycle is transforming the world economy", the report from Standard Chartered said the share of emerging market economies could rise to 63 per cent of world GDP by 2030 from 38 per cent today.
Economies with growth rates of over 4 per cent - primarily emerging economies - now account for 37 per cent of the world GDP, up from 20 per cent in 1980. Their share is set to reach 56 per cent by 2030, Standard Chartered said, adding that Asia (excluding Japan) is likely to account for two-fifths of global GDP by 2030.
"World trade could quadruple in value terms to $75 trillion by 2030. Urbanisation and the growth of the middle classes, especially in Asia, are the driving forces," it said. "We expect global growth to pick up in 2014-17 as emerging markets implement reforms and developed markets finish restoring balance sheets. Global growth is set to average 3.5 per cent for 2000-30, well above the 3 per cent rate for 1973-2000," the report said.
"Recent pessimism about emerging markets is overdone. Concerns over the middle-income trap, excessive Asian leverage, 'broken' growth models and rising US interest rates appear exaggerated," Standard Chartered Global Head of Macroeconomic Research John Calverley said.
Calverley further added that "while we have lowered our long-term forecasts for China, India and Europe, the case for an emerging markets-led super-cycle still holds. Successful reforms will be critical for these economies to realise their catch-up potential."