S&P expects India, currently the world’s fifth-largest economy, to grow at 6.4% this fiscal and estimates growth will pick up to 7% by fiscal 2027. In contrast, it expects China’s growth to slow to 4.6% by 2026 from an estimated 5.4% this year.

India’s gross domestic product (GDP) (INGDPY=ECI) grew a bigger-than-expected 7.6% in the second quarter of fiscal 2024, data showed last week, which prompted several brokerages to raise their full-year estimate. However, S&P, which had raised its forecast even before the latest data, said India’s growth will depend on its successful transition to a manufacturing-dominated economy from a services-dominated one.

A paramount test will be whether India can become the next big global manufacturing hub, an immense opportunity. While Prime Minister Narendra Modi’s government has been driving domestic manufacturing thorugh the “Make in India” campaign and production-linked incentives (PLIs), the share of manufacturing is still roughly 18% of GDP.

India has one of the youngest working populations in the world, with nearly 53% of its citizens under the age of 30.

According to the reuters