India 2025-40: Strategic Choices at a Critical Economic Crossroads

India finds itself at a defining crossroads where strategic decisions will sculpt the direction of its economy for the next two decades, reveals a new report by DBS Group Research titled "India 2025-40 Outlook: Pivotal Juncture." The report underscores that India's long-term economic potential remains solid but necessitates concerted efforts in institutional reforms, investment, and human capital development.

According to DBS, India's economy is projected to grow at an average rate of 6.7 percent from 2025 to 2040, outpacing China's projected 3.0 percent growth during the same period. On a nominal scale, GDP growth is anticipated to average 9.7 percent in INR terms, with an optimistic scenario pushing growth figures between 7.3 and 7.5 percent.

By 2040, India's nominal GDP is expected to surpass USD 11 trillion, cementing its position as the world's third-largest economy. The report also predicts that per capita incomes will rise from USD 3,700 by 2030 to approximately USD 7,000 by 2040. However, the need for a robust human capital framework is emphasized as key to maximizing benefits from favorable demographics.

With 26 percent of India's population aged 10-24, the workforce is projected to grow by 8-10 million annually through 2040. Despite this demographic advantage, challenges persist. DBS notes that about 40 percent of the workforce remains in agriculture, contributing less than one-fifth of national growth, while two-thirds of workers are either self-employed or categorized as casual labor.

This disbalance necessitates urgent reforms in skills, health, and education. The report highlights India's competitive edge in service exports, with its share doubling to 4.3 percent in 2023 compared to 1.9 percent in 2005. From 2012 to 2025, service exports expanded at an 8 percent CAGR, projected to grow to USD 480 billion by 2030 and USD 650 billion by 2040.

India's swift digital transformation, buoyed by initiatives like AI, UPI, and IndiaStack, is expected to enhance productivity. DBS emphasizes that India's evolution will rely on a synchronized effort in development, diversification, digitalization, and decarbonization.

The report concludes that India's policy framework in the coming decade will be crucial in translating demographic potential into sustainable, inclusive, and high-quality growth.