Amidst Looming Recession Fears, India’s Population Growth Ushers In Hope for Economic Expansion3-min read

Sayan Chakraborty

Sayan Chakraborty |  Updated on 30/1/2023

India’s rapidly growing population is a key factor in its economic success. Despite being the world’s second-most populous nation, India’s economy has grown steadily, rising from being the 11th-largest economy in the world to the fifth-largest. This year, the country is expected to have the world’s fastest-growing economy, with GDP forecast to expand by 6.9%.

The country’s economy is set to continue its trajectory of growth, with predictions that by 2025-26 it will rival Germany, which had a GDP of over $4 trillion in 2021, and surpass Japan, whose GDP was almost $5 trillion, as the third-largest economy by 2027.

India: Tomorrow’s China?

Much of India’s economic success is driven by infrastructure spending, which has improved the country’s roads, rail networks, and ports. This has made India the second-largest consumer of steel in the world and spurred a growing energy demand. The country’s utility and power companies have seen average sales growth of 91% in the past three years, more than double the average for corporate India.

Stocks in India

Can a solid economic strategy and strong demographics turn India into a superpower?

India has also benefited from its trade relations with Russia, which have grown increasingly beneficial for New Delhi. The country is one of the largest buyers of discounted Russian oil, and around 90% of the Indian army’s equipment comes from Russia. Additionally, as many other countries have imposed sanctions on Russia for its actions in Ukraine, India has been able to continue trading with Russia without disruption.

India’s population growth, which has expanded by 5.2% to almost 1.4 billion between 2016 and 2021, has been a critical driver of its economic success. This growth has been much more significant than that of the other four countries with larger GDPs: the United States, China, Japan, and Germany. The country’s population is expected to continue growing by 4.6% during the next five years, while Japan and China’s populations will shrink.

Investing in India

As the country’s economy continues to expand, the potential for investment opportunities in the country are becoming increasingly apparent. However, it is essential to note that investing in India also comes with various risks, including the possibility of global recession, geopolitical turmoil, and domestic policy changes.

Despite these potential challenges, many of the same investment themes that have proven successful in China – such as the growth of financial services, industrials, and consumer goods – are beginning to gain traction in India as well.

According to experts, the coming decade could see India becoming a major player in the global investment landscape, much like China has in recent years. As voiced by an analyst from Morgan Stanley,

“India offers the most compelling growth opportunity in Asia in the coming years.”

As such, it is worth keeping an eye on developments in the country as it continues to emerge as a major economic force. Investing in Indian stocks may see impressive returns should this growth trajectory be maintained if not even accelerated.