InvestorQ : Has a recent report by Bank of America, projected that India will become the third largest economy by 2030?
Mary Joseph made post

Has a recent report by Bank of America, projected that India will become the third largest economy by 2030?

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Arusha Ray answered.
4 months ago
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You are right that this has been highlighted in a recent report by BOFA Securities, the securities and investment arm of Bank of America. The report by BOFA Securities has highlighted that India could emerge as the world’s third largest economy by 2031. Currently, the 4 largest economies in the world are the US, China, Japan and Germany in terms of GDP. GDP of India, UK and France is around the same levels.

That would mean that India will have to overtake UK France by a margin in Phase 1 and also overtake Japan and Germany a few years later. This assuming that commodity heavy economies like Canada, Russia and Brazil do not benefit substantially from a prolonged commodity price boom. By 2031. India is expected to overtake Japan’s GDP in nominal terms.

BOFA has assumed 6% real GDP growth, 5% inflation and 2% rupee depreciation over this period, which appears to be a reasonable assumption. BOFA had originally projected that India would achieve this position by 2028. However, that has now been pushed back by 3 years due to the lag effects of the pandemic. This is likely to delay the milestone by around 3 years as per BOFA.

Initially, when BOFA had brought out this report in 2017,m it had identified 3 key drivers for growth viz demographic dividends of a young population, financial maturing of markets and creation of mass markets. Now, in its latest report, BOFA has added 2 more triggers that BOFA has now identified. A solid forex buffer of nearly $600 billion and 18 months of imports and softer real lending rates are also seen as major positives for India.

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