India to become world's 2nd largest economy by 2050, says PwC

India is set to be one of the world’s three fastest growing economies over the next three decades, en route to becoming the second largest economy in the world by 2050. A new report from PwC provides long-term economic predictions for the global economy, examining a number of dimensions such as demographic trends, capital investment, level of education and technological progress.
 
Emerging markets are going to occupy the spotlight over the next few decades, predicted to be the primary contributors to global economic growth up until 2050 at least. Drawing from academic literature to construct an economic growth model, Big Four accounting and advisory firm PwC has released ‘The World in 2050,’ a predictive analysis on future economic trends in the global economy.
 
The analysis was conducted amongst 32 of the world’s largest economies, which cumulatively contribute 85% of the global GDP at current levels. According to the report, the global GDP is projected to grow at 2.6% till 2050, and will double in size by 2042, provided that economic policies remain growth-oriented and there are no catastrophies for the economy or the world in general.
This growth, according to the report, will be driven by the E7 group of emerging economies, which include Brazil, China, India, Indonesia, Mexico, Russia and Turkey, who will achieve a combined average growth rate of 3.5 % annually. Meanwhile, the G7 group, representing the advanced economies of Canada, France, Germany, Italy, Japan, the UK and the US, will cumulatively grow at just 1.6%.
 
Comparing these two groups further, the report analyses how the E7 countries are set to grow to twice the size of the G7 economies by 2040. These numbers translate to GDP contribution as well, with the E7 countries contributing 50% of the world’s GDP by 2050, while the G7 group will contribute just over 20%.
India will do particularly well during this period, projected to become the world’s second largest economy by 2050 behind China. In terms of contribution to the global GDP, India’s share in the global GDP currently stands at 7%, and will more than double to 15% by 2050. To put this in perspective, the entire contribution of the EU 27 countries will be 10%, which is lower than India’s. Meanwhile, China’s share will increase from 18% to 20% in the same period. On the contrary, the share of the US and the UK will drop from current levels of 16% and 15% to 12% and 9% respectively in 2050.
 
Similar trends will emerge with respect to Purchasing Power Parity (PPP). China currently stands in first place in terms of PPP, followed by the US and India in second and third place. By 2040, India will have overtaken the US for second place in terms of PPP. Together with Vietnam and Bangladesh, India will be among the three fastest growing economies in the world till 2050, registering annual growth rates of 5% each.
However, as is widely accepted across academic literature, the GDP is not as reflective of a country’s true economic condition as its per capita GDP. This is where India’s substantial population holds it back. Compared to second place in the GDP rankings by 2050, India will occupy 28th position in the per capita list over the same time-frame, behind all the G7 countries, and sitting at the bottom of the E7 list.
 
On the other hand, the per capita figures are on the mend. Currently, the GDP per capita in the US is nine times that of India. By 2050, the US figure will have reduced to thrice the size of the India figure as India’s economy continues its expansion. This growth in individual purchasing power will further boost economic growth for the country, as spending will increase in the consumer market.
 
PwC’s research is substantiated by a report released by Big Four rival Deloitte earlier this year, which predicted that India would drive Asia’s economic growth in years to come, at least till 2050.

Commenting in the report, John Hawksworth, Chief Economist at PwC UK said, “By 2050 we project China will be the largest economy in the world by a significant margin, while India could have edged past the US into second place and Indonesia have risen to fourth place. The EU27’s share of global GDP could have fallen to below 10%. We also think the world economy will more than double in size between now and 2050, far outstripping population growth.”