There are, however, various critical economic parameters other than GDP that are relevant in such inter-country comparisons of economic growth prospects and potential. We consider some of these below.
Trends in the growth of population and workforce
In the current century, unlike other major economies, the Indian economy has a significant advantage linked to the economic potential of its large size and age structure of its population. Recent population trends3 indicate that India has already overtaken China in terms of total population. With this, India is estimated to have the largest share of the global population at 17.8%, equivalent to more than one-sixth of the global population. In terms of the share of working-age population, India is expected to overtake China in 2030. This share is projected to remain not only higher than that of China in the remaining decades of this century, but the gap is also estimated to increase. Further, India would maintain the lowest old-age dependency ratio throughout the remaining decades of the century relative to the peer countries4 , enabling higher saving and investment rates.
A key challenge for the Indian economy is to find productive employment for the large and growing working age population. Creation of suitable employment opportunities is therefore India’s key current policy challenge. This situation may become even more challenging due to the emerging labor-saving technological developments relating to AI and Generative AI. It is notable that India’s total labor force participation rate estimated at 49.6% in 2024 is the lowest among peer countries. India’s female labor force participation rate at 24.1% would also be the lowest amongst these countries.
Trends in indebtedness
Another critical economic dimension is to assess a country’s liabilities relative to its respective GDP, as this indicates the burden of debt servicing for future generations which is to be provided from future income. India is most favorably placed in comparison to its peers with a total debt-GDP ratio5 of 172.7% at the end of December 2022. In comparison, China’s total debt-GDP ratio is nearly 300% and that of Japan is more than 400%. These high liabilities would have to be serviced by these countries, especially in a period when the share of their working-age population would be shrinking. Considering the liabilities of the government alone, India’s general government debt-GDP ratio is the second lowest after Germany.
Strategies for promoting and stabilizing India’s growth
Technological innovations pertaining to AI/Gen AI result in growth-promoting but employment-reducing impacts. India must ensure, by suitable policy support, that the employment reducing effect of these technological developments is overcome by the growth-expansion effects in a manner such that net employment growth remains suitably positive while overall GDP growth is considerably enhanced. Table 2 provides a summary of some of the recent available estimates of the economic impact of AI/Gen AI on the global as well as the Indian economies.