• | 6:05 pm

India, emerging markets to drive global economic growth by 2035: S&P

S&P report added that India will be the fastest-growing major economy over the next three years and the third largest globally by 2030.

India, emerging markets to drive global economic growth by 2035: S&P
[Source photo: Chetan Jha]

By the end of the next decade, emerging markets will contribute 65% of global economic growth, rating agency S&P Global mentioned in its latest report, highlighting that this growth will be driven by emerging economies in Asia-Pacific, including China, India, Vietnam, and the Philippines.

The report added that India will be the fastest-growing major economy over the next three years and the third largest globally by 2030.

In a report titled ‘Emerging Markets: A Decisive Decade,’ the rating agency emphasized that by 2035, India will be the world’s third-largest economy, with Indonesia and Brazil ranking eighth and ninth, respectively.

The report findings said that India’s 2024 entry into JP Morgan’s Government Emerging Market Bond Index could provide additional government funding and unlock significant resources in domestic capital markets.

However, to continue its upward trajectory, India needs to ensure improved market access for investors and ease settlement procedures.

The rating agency further said that the country needs to strengthen its weak fiscal flexibility by boosting its capital expenditures, which would further support long-term growth.

It added that with the country expected to have the world’s largest population by 2035, the government faces mounting challenges in ensuring basic service coverage and maintaining productivity through growing investment.

The report added that by the end of this decade, nine key emerging markets will be among the 20 largest economies; however, their per capita income will remain well below that of advanced economies.

The report added that emerging markets that benefit from global structural trends such as energy transition and supply chain reconfigurations are better positioned to boost productivity.

Countries like Indonesia, Chile, and the Philippines are well suited to supply the metals and minerals required for the energy transition. Mexico, India, and Vietnam could benefit from supply chain relocation, given their relatively mature manufacturing sectors and strategic trade ties with the US and other developed markets.

According to S&P Global Market Intelligence forecasts, India’s consumer spending on goods will be worth $1.29 trillion in 2024. The inflation-adjusted growth of 4.8% in the past five years is expected to increase to 7.0% in the next five years.

Jose Perez-Gorozpe, managing director and head of credit research, emerging markets, S&P Global Ratings, mentioned in the report, “India’s expansion in electronics has thus far followed an assembly-to-component strategy, using tariffs and production-linked incentives to draw investment in the manufacturing of smartphones and other network-connected devices, providing “in-market, for-market” justifications for investments in manufacturing in the country.”

He, however, stressed, “The challenge for India’s strategy of working upstream from assembly is that many developed economies and China are actively looking to build up their electronic components sectors.”
He added that heavy-handed application of trade management conditions, as India tried but abandoned laptop computers in 2023, can dampen global investment. 

He suggested, “Widening the range of assembled products that benefit from production-linked incentives should drive economies of scope that make upstream supply chain investments more compelling.”

More Top Stories: