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India's economy is on track to surpass the United States' and become the second-largest in the world behind China in a matter of decades, according to forecasting by Goldman Sachs Research.
The investment bank's analysts issued a report last week that projects India will knock the U.S. into third place by 2075, when the Asian nation is expected to reach gross domestic product of $52.5 trillion, which is 1 trillion dollars higher than America's GDP level is expected to reach at that time.
President Biden, left, and Narendra Modi, India's prime minister, toast during a state dinner at the White House on June 22, 2023. (Al Drago / Bloomberg via Getty Images / Getty Images)
According to the data, China will pass the U.S. to become the world's largest economy sometime in the 2030s, and the communist country will have a GDP of $57 trillion by 2075.
Santanu Sengupta, Goldman Sachs Research's India economist, said in the report that the nation's population – which recently became the world's largest at 1.4 billion – positions it well for growth because it has one of the best ratios between its population of working-age people versus its non-working or dependent population like children and the elderly.
An engineer works on a component at a Godrej Aerospace manufacturing plant in Mumbai, India, on July 10, 2023. Goldman Sachs projects India's economy will become the second-largest in the world by 2075. (Punit Paranjpe / AFP via Getty Images / Getty Images)
"Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies", Sengupta said. "So, that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, continuing the growth of infrastructure."
The report said that beyond its demographic advantages, capital investment is also expected to be a significant driver of India's growth. The report stated, "India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment."
Children visit the Taj Mahal in Agra, India, on April 25, 2023. India overtook China as the world's most populous country this year and is now set to become the world's second-largest economy by 2075, according to Goldman Sachs. (Pawan Sharma / AFP via Getty Images / Getty Images)
Goldman Sachs researchers did note there are some risks that could hold India back from reaching its growth forecast. The country's potential for growth could be hurt if it does not increase its labor force participation rate, which has fallen for the past 15 years and is particularly low among women.
India is currently the fifth-largest economy in the world with a GDP of $3.73 trillion, according to the International Monetary Fund. That's behind No. 4 Germany at $4.3 trillion, No. 3 Japan at $4.4 trillion, No. 2 China at $19.37 and No. 1 America at $26.85 trillion.