India is increasingly attracting the world’s interest as a result of the country’s impressive economic performance, brought about by the liberalisation process of the past two decades and the start of the march toward a functioning market economy.

As reforms progressed, economic growth rose from an average of 3.7% in the 50s and 60s – the “Hindu rate of growth” – to a healthy 6% in the 90s.

At least as importantly, social indicators also improved significantly. The poverty ratio dropped from more than 50% of the population in the 1950s to about 26% in recent years.1 Infant mortality as recorded by the UNDP almost halved from 127 per 1,000 live births in 1970 to 67 in 2002.

We expect India to keep the steady growth pace of the last decade, i.e., roughly 6% per year, over the next 10 to 15 years. Favourable demographics, increasing investment in education and infrastructure and further integration with the world economy are the factors on which our projections are based. This performance will make India the fastest growing economy among 34 developed and developing countries, as highlighted in a recent comparative study by DBR.

Thus, GDP will double every 12 years and India’s economy will be the world’s third largest by 2020 (in purchasing power parity or PPP terms, i.e., excluding exchange rate effects), trailing only the US and China. In PPP terms, India’s GDP level will be approximately 40% of that of the United States in 2020, up from 27% in 2002.

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