India Can Beat US, China To Become World’s Biggest Economy, Says former RBI Deputy Governor

India could potentially overtake the US and China to become the world’s largest economy if it fully leverages its demographic dividend and addresses structural constraints around employment, manufacturing, infrastructure and women’s workforce participation, former RBI Deputy Governor Michael Patra said.

Speaking at Emkay Confluence 2026 in Mumbai, Patra said India was at a critical stage of its economic journey, with several favourable factors creating an opportunity to sustain high growth over the coming decades.

India has averaged 7.7% growth since FY22 and is currently the second-largest contributor to global growth after China, according to Patra. The country’s young and expanding working-age population provides a demographic window that could remain open until around 2055.

“This is India’s time,” Patra said, stressing that the demographic advantage needs to translate into higher incomes, savings and investment.

Jobs, Manufacturing Key To Growth

Patra, however, flagged structural weaknesses that could prevent India from fully benefiting from its demographic advantage.

A relatively low contribution of labour to economic output remains a concern despite the country’s large working-age population. Better skilling, stronger alignment between education and employment and higher participation of women in the workforce will be critical, he said.

Infrastructure investment is another area where India has significant room to improve. Patra said per-capita spending on physical infrastructure remains relatively low compared with the country’s potential, while faster investment, supportive regulations and a deeper corporate bond market would be needed to finance large, long-duration projects.

Manufacturing could provide another major growth engine. The sector currently accounts for around 17% of GDP. Raising manufacturing growth from around 7.5% to 8.5% could lift its share to about 20%, while growth of 12.5% could potentially take it towards 25%, Patra said.

A stronger manufacturing base would also help absorb relatively unskilled labour and create capabilities that can support higher-value services.

Exports And Global Risks

India’s growing electronics exports and expansion of global capability centres indicate that the country is becoming more integrated with global supply chains. Further growth in goods and services exports could strengthen its position in the global economy.

At the same time, geopolitical fragmentation and disruptions to major trade routes remain risks. Any disruption around the Strait of Hormuz, for instance, could push up energy and agricultural commodity prices, triggering inflationary pressures and weakening global growth.

Patra also highlighted India’s inflation-targeting framework, under which the RBI targets 4% inflation with a 2% tolerance band, as an important economic strength.

Current projections suggest India could first overtake Japan and Germany to become the world’s third-largest economy. But if the country successfully uses its demographic dividend and implements the required structural reforms, Patra said, it could potentially overtake the US by the mid-2030s and China several years later to become the world’s largest economy