India to be world's 3rd largest economy by FY28: SBI

India is likely to get the tag of the 3rd largest economy by FY2027-28 based on actual GDP data as on March 2023, SBI Research says in its latest 'Ecowrap' report.

The projections come against the backdrop of Prime Minister Narendra Modi's statement on Wednesday, in which he says India will be among the "top three economies in the world" during the third term of the BJP government.

"In our first term, India was in the 10th spot in terms of economy. In our second term, India has become the fifth-largest economy. Based on the track record, I would like to assure the people of the country that in the third term, India will be among the top three economies in the world," PM Modi said at the inauguration of Delhi's revamped Pragati Maidan on Wednesday.

The latest SBI Research report concurs with the PM's statement, saying India should surpass both Japan and Germany in 2027 at the current rate of growth.

"The path taken by India since 2014 reveals that India is likely to get the tag of the 3rd largest economy in 2027 (or FY28) based on actual GDP data as on March 2023, a movement of 7 places upwards since 2014 when India was ranked 10th and 2 years earlier than our previous forecast of 2029," writes Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

Interesingly, the incremental increase by India between 2022-2027 is expected to be more than the current size of Australia’s economy at $1.8 trillion. "At this rate, India is likely to add $0.75 trillion in every 2 years, implying India is all set to touch $20 trillion by 2047, at least on current numbers," says the report, adding that India’s global share in GDP will cross 4% by 2027.

To achieve this target, India needs to grow by CAGR of 8.4% till 2027 (in dollar terms), which translates into 11.0-11.5% nominal GDP growth per annum (in Rs terms), which is eminently achievable with a 6.5-7% growth rate, Ghosh writes.

For Q1 FY2023-24, economists are pegging India’s GDP to surpass 8% (SBI projection at 8.1% with an upward bias), which could push India’s GDP growth beyond 6.5% for FY24. "We firmly believe that in a world that is ravaged by uncertainties, 6.5%-7.0% growth is the new normal," says the report. Global financial agency Internation Monetary Fund in its May report had also said that China and India together are forecast to generate about half of global growth in 2023.

The state-wise estimate of SBI Research shows at least two Indian states, Maharashtra, and Uttar Pradesh, are expected to break the $500 billion mark in 2027 (or FY28) when India achieves 3rd place in the global economy. The GDP size of major Indian states in 2027 could be more than the size of some of the Asian and European countries like Vietnam, Norway, and so on.