The rising Chinese economy has been America’s biggest international competitor for decades…but now India has the potential to be an even bigger rival.
Although currently trailing Japan, Germany, China, and the United States in GDP, India’s explosive growth has experts forecasting a dramatic change in the landscape of global economic power. A new report from Goldman Sachs predicts that India will be the world’s second-largest economy by 2075 —surpassing even the U.S.
The investment bank’s projection shows India’s GDP surging to $52.5 trillion by 2075, barely edging out America’s anticipated $51.5 trillion and trailing the $57 trillion expected for China. If China continues on this trend, the United States could find itself in third place before the end of the century.
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The most significant factor in India’s upward trajectory is the sizeable growth of its population. A United Nations estimate from April 2023 reported India’s population at 1,425,775,850, matching and surpassing China as the world’s most populous country. Further, India’s population is also notably younger than China’s (averaging 28 and 38 years old respectively). This gives India a more favorable dependency ratio, or the percentage of working-age citizens to children and the elderly.
“Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies,” said Santanu Sengupta, India economist for Goldman Sachs Research. “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.”
This vast difference in dependency ratio likely stems in part from China’s historically disastrous One-Child Policy, the controversial population control measure implemented by the Chinese government in 1979. Intended to prevent food shortages as China urbanized and the life expectancy of its citizens increased, the policy resulted in a shrinking workforce and labor shortages, burdening younger generations with caring for their predecessors.
As these trends continue in both nations, India may even come to rival China for economic supremacy. Patrick Bet-David highlighted the compelling argument for this prediction:
But it will take more than just numbers to give India the edge. To that end, the Indian government is also investing heavily in infrastructure and innovation. The latest government budget shows a heavy emphasis on road and railway construction and offers incentives for local governments to assist in these projects. A focus on technological development promises to increase outputs for each unit of labor, making India an increasingly attractive prospect for investment by the private sector.
“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,” Goldman’s report stated.
The two biggest roadblocks to India’s future success are workforce participation and ease of doing business. Despite India’s growing population, labor force participation declined in the last 15 years and China continues to score higher in terms of ease of access for international business. But, if India can sufficiently lower barriers to outside interests and incentivize employment among its younger population, India’s economy may well be on its way to superpower status in a few short years.
And as the narrative shifts to center on the rivalry between India and China, America may be facing a far more difficult fight for a seat at the table in the 22nd Century.
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