Indian economy to grow by an average annual rate of 6.7 per cent to March 2031 driven by manufacturing and services exports and consumer demand, said S&P Global.

The agency has projected the growth rate for India despite short-term challenges from rate hikes and a global slowdown.

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S&P retained its earlier forecast of 6 per cent growth for the current fiscal year ending March 2024, noting even at this rate, India will be the fastest-growing economy in the G20.

In a report titled ‘Look Forward: India’s Moment’, S&P Global said, “While the world is in the midst of an unprecedented period of transition and uncertainty, India faces a defining opportunity to capitalize on this moment.”

It expects the size of the economy to reach $6.7 trillion from $3.4 trillion in FY2023. This could see per capita GDP rise to about USD 4,500.

If realised, India would overtake Japan and Germany to become the third-largest economy in the world.

Last month key UN body, the International Monetary Fund raised its growth forecast for India by 0.2 percentage points to 6.1 per cent for the current fiscal.

According to S&P Global, the economy is set to benefit from efficiency gains from tax reforms, state support to digital and physical infrastructure, and reducing leakages from government subsidy transfers.

New opportunities are expected to emerge in the manufacturing sector from an accelerating global trend towards supply chain diversification as the government offered incentives to manufacturers and improving infrastructure.

It is also to be noted that the government has been bullish on Semiconductor manufacturing as it has partnered with many global giants in this regard.

“India’s ability to become a major global manufacturing hub will be a paramount test for its economic future,” S&P Global said.

The report believed that developing a strong logistics framework will be key in transforming India from a services-dominated economy to a manufacturing-dominant one.

Increasing female participation in the workforce to realize a demographic dividend will also be the key in the growth story.

By 2031, the Indian consumer market will more than double surging to $5.2 trillion from $2.3 trillion in 2022.

This growth will be driven by a rise in household incomes and higher spending on food and other items.

“Higher per capita incomes will also likely boost discretionary spending in areas such as entertainment, communications, restaurants and hotels,” said the report.