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S&P Global on Thursday projected the Indian economy to grow by an average annual rate of 6.7% to March 2031, driven by manufacturing and services exports and consumer demand, despite short-term challenges from rate hikes and a global slowdown.

S&P retained its earlier forecast of 6% growth for the current fiscal year ending March 2024, noting even at this rate, India will be the fastest growing economy in the G20.

Last month, the International Monetary Fund raised its growth forecast for India by 0.2 percentage points to 6.1% for the current fiscal year, while the central bank has forecast 6.5% rise.

"While the world is in the midst of an unprecedented period of transition and uncertainty, India faces a defining opportunity to capitalize on this moment," said the S&P Global in its report "Look Forward: India's Moment" released in Delhi.

S&P Global expects the size of the economy to reach $6.7 trillion from $3.4 trillion in fiscal 2023, which could see per capita GDP rise to about $4,500.

If realised, India would overtake Japan and China to become the third largest economy in the world.

In manufacturing, new opportunities are expected to emerge from an accelerating global trend towards supply chain diversification, said the report, as the government offered incentives to manufacturers and improving infrastructure.

The economy is set to benefit from efficiency gains from tax reforms, state support to digital and physical infrastructure and reducing leakages from government subsidy transfers.

The Indian consumer market will more than double by 2031, surging to $5.2 trillion from $2.3 trillion in 2022, driven by rise in household incomes and higher spending on food and other items.

"Higher per capita incomes will also likely boost discretionary spending in areas such as entertainment, communications, restaurants and hotels," said the report.

S&P Global said developing a strong logistics framework will be key in transforming India from a services-dominated economy to a manufacturing-dominant one, besides increasing female participation in the workforce to realize a demographic dividend.

"India's ability to become a major global manufacturing hub will be a paramount test for its economic future."