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

27 November 2017 Consultancy.in

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.
Emerging markets will dominate the world’s top 10 economies by 2050This 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%.
Projected change in shares of world GDP from 2016 to 2050India 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.
The US and Europe will steadily lose ground to India and ChinaHowever, 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.”

Profile

More news on

×

The travel and tourism sector's contribution to India's GDP is expanding

22 April 2019 Consultancy.in

Both domestic and international travel are increasing in frequency across India, with the total number of trips being taken adding up to 2 billion per year, according to a new report from global management consultancy Bain & Company. Travel and tourism are becoming primary contributors to India's economic output.  

The findings come in the context of a rapidly expanding economy, rushing towards the position of the second largest economy worldwide by 2050. Economic growth has been contributing to an overall increase in prosperity, and the extra disposable income appears to be trickling into the travel sector.

Indians took 2 billion trips last year, and the overall spending on transportation amounted to nearly $94 billion. As a result, the size of the travel and tourism industry has been rapidly expanding over the last half a decade, making it the seventh biggest contributor to the Indian GDP currently.

Domestic and International trips by Indian travellers

In 2013, the sector contributed just under 7% of the GDP, a figure that has now grown to nearly 9.5% for last year. According to Bain & Company, the contribution is starting to resemble that in developed economies, given that the travel & tourism sector contributes 10.5% to the UK economy.

The upward trajectory is only likely to continue. Leading up to 2021, the travel & tourism sector in India is expected to grow at a compound annual growth rate of 13.5%, reaching a staggering value of $136 billion. Bain anticipates changes in the nature of travel expenditure as well.

India is currently home to 850 million online users, which is making online marketing and consumption alike of travel services a growing market. Mobile data usage is at an all time high, which is leading to “high platform penetration” and “new business models,” according to Bain.

Indian tourist spending

“New business models like the sharing economy, and standardisation and aggregation of capacity, mean that the relevance of online channels is expected to gain share. To reap the benefits of increasing online spending, companies need to facilitate new user adoption and increase penetration in the existing base across the purchase journey,” says the report.

As per the firm, the online domain is not only affecting volumes in the market, but is also having an influence on the decision-making patterns of consumers across the country. In order to understand this influence, the report breaks internet usage down into three phases, namely interest, research and experience.

Nearly 90% of consumers were influenced by online factors at any one of these three phases. Examples of such online actors include price comparison websites and travel search engines in the early phases, and booking websites and feedback portals in the latter phases of travel.

Travel and tourism as a percentage of the GDP

According to the firm, nearly 60% of Indian consumers complete bookings for their travel online while more than 50% share feedback via online portals. For businesses, the spike in online activity allows for data analytics-driven targeted marketing strategies using individual customer behaviour.

This targeted marketing is disseminated through five categories of Indian travellers, namely frequent flyers, budget business travellers, experience-oriented travellers, budget-group travellers and occasional travellers. Using this division, businesses can prioritise which phase of online activity they wish to invest in.