India could become the second-largest economy in the world by 2075, according to a forecast by Goldman Sachs.

Key factors include labour force participation, an extensive talent pool and the working-age population ratio, with India’s GDP forecast to record radical growth to hit $52.5 trillion, marginally surpassing the projection for the US.

“Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies,” according to Santanu Sengupta, Goldman Sachs Research’s India economist.

He added that the country’s population has one of the best ratios between the working-age population and the number of children and elderly. “So that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, continuing the growth of infrastructure,” Sengupta said.

The Goldman Sachs economist referenced India’s innovation and technology advancement as a key driver for the forecast GDP growth. “Innovation and increasing worker productivity are going to be important for the world’s fifth-biggest economy. In technical terms, that means greater output for each unit of labour and capital,” he added.

In addition, another significant factor for the country’s future growth is capital investment. “Driven by favourable demographics, India’s savings rate is likely to increase with falling dependency ratios, rising incomes, and deeper financial sector development, which is likely to make the pool of capital available to drive further investment,” he said.

Favourable demographics will also bolster growth in India, according to Sengupta: “In India, the demographic transition is happening more gradually and over a longer time period than the rest of Asia. This is primarily due to a more gradual decline in death and birth rates in India compared with the rest of Asia,” he said.

In contrast, the Goldman Sachs economist said the principal downside risk would be if the labour force participation rate doesn’t rise: “The labour force participation rate in India has declined over the last 15 years. If you have more opportunities — especially for women because the women’s labour force participation rate is significantly lower than men’s — you can shore up your labour force participation rate, which can further increase your potential growth,” Sengupta stated.