BENGALURU: India will remain the fastest-growing major economy for at least the next three years, setting it on course to become the world’s third-largest economy by 2030, S&P Global Ratings said in a report.

S&P expects India, currently the world’s fifth-largest economy, to grow at 6.4% this fiscal and estimates growth will pick up to 7% by fiscal 2027.

In contrast, it expects China’s growth to slow to 4.6% by 2026 from an estimated 5.4% this year.

India’s gross domestic product (GDP) grew a bigger-than-expected 7.6% in the second quarter of fiscal 2024, data showed last week, which prompted several brokerages to raise their full-year estimate.

However, S&P, which had raised its forecast even before the latest data, said that India’s growth will depend on its successful transition to a manufacturing-dominated economy from a services-dominated one.

“A paramount test will be whether India can become the next big global manufacturing hub, an immense opportunity,” S&P said in its Global Credit Outlook 2024 report, dated Dec. 4.

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While Prime Minister Narendra Modi’s government has been driving domestic manufacturing through the ‘Make in India’ campaign and production-linked incentives (PLIs), the share of manufacturing is still roughly 18% of GDP.

In contrast, services account for over half of India’s GDP.

S&P said that developing a strong logistics framework is key to becoming a manufacturing hub and that India also needs to “upskill” its workers and increase female participation in the workforce to realize its “demographic dividend.”

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India has one of the youngest working populations in the world, with nearly 53% of its citizens under the age of 30.