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India’s demographic window of opportunity to 2055 must be fully leveraged to accelerate growth, says former RBI Deputy Governor Dr. Michael Patra

India is at a critical juncture in its economic journey, with the potential to emerge as the world’s largest economy in the coming decades, provided it successfully leverages its demographic dividend and addresses structural challenges related to employment, manufacturing, infrastructure and women’s labour force participation, said Dr. Michael Patra, former Deputy Governor, Reserve Bank of India, at the Emkay Confluence 2026.

Speaking on the theme “India Rising: Opportunities and Challenges,” Dr. Patra highlighted that India’s growth trajectory has strengthened significantly following the pandemic. India has averaged 7.7% growth since FY22 and is currently the second-largest contributor to global growth, behind China.

India’s demographic advantage represents one of its biggest opportunities. With a young population and a rising working-age population, the country has a window extending to around 2055 to maximise the benefits of higher incomes, savings and investment. Effectively utilising this demographic dividend will be critical to sustaining higher growth over the coming decades.

“India’s time has come,” he noted, pointing to the convergence of several favourable forces that could provide significant tailwinds to the country’s economic journey.

Nirav Sheth, CEO – Institutional Equities, Emkay Global Financial Services Ltd., said, “India’s economic journey is entering a phase where the scale of its opportunity is matched by the complexity of the global environment. For investors, understanding this transition requires looking beyond near-term cycles and assessing the deeper shifts shaping India’s markets and its place in the global economy. At Emkay Confluence 2026, we brought together leading voices from across the economic and investment landscape to examine these shifts and the opportunities they present. We believe that informed dialogue, independent thinking and a long-term perspective will be central to navigating this phase of India’s growth and unlocking its full potential.”

India has also strengthened its economic buffers across the external, fiscal and financial sectors. Foreign exchange reserves, a relatively contained current account deficit, an improving fiscal position and stronger banking-sector balance sheets provide resilience against external shocks. Fiscal consolidation is also being accompanied by a shift towards capital expenditure, creating greater space for private-sector investment.

Growth potential hinges on structural reforms

While the outlook remains favourable, several structural constraints need to be addressed to fully realise India’s potential.

One of the key challenges is the relatively low contribution of labour to economic output despite India having the world’s largest population and a young workforce. Greater reskilling, better alignment between education and employment, and increased participation of women in the workforce will be critical.

Improving women’s labour force participation could significantly expand India’s productive capacity. A more supportive workplace environment and faster transition of skilled graduates into employment will also be important.

Infrastructure is another area where greater investment could generate substantial economic benefits. India’s per-capita spending on physical infrastructure remains relatively low compared with its potential. Faster infrastructure investment, enabling regulations and a deeper corporate bond market will be important for financing large, long-gestation projects.

Manufacturing and exports could be the next growth engines

Manufacturing remains critical to India’s next phase of development. While the country successfully transitioned from agriculture towards services, a stronger manufacturing base is necessary to absorb large pools of relatively unskilled labour and build capabilities that can subsequently support higher-value services.

Manufacturing currently accounts for around 17% of GDP. Raising manufacturing growth from around 7.5% to 8.5% could increase its share to around 20% of GDP, while growth of 12.5% could potentially take its contribution towards 25% of GDP, strengthening India’s position as a global manufacturing hub.

The opportunity extends to exports, with India’s growing electronics exports and expansion of Global Capability Centres (GCCs) demonstrating its ability to integrate more deeply with global supply chains. Raising exports of goods and services would further strengthen India’s position in the global economy.

Geopolitical fragmentation remains a key risk

India’s growth trajectory will unfold against a backdrop of heightened geopolitical uncertainty, fragmented global trade and potential disruptions to critical trade routes.

The Strait of Hormuz and other global shipping choke points could disrupt transportation, energy and agricultural commodity prices. Such supply-side shocks can translate into higher inflation and weaker global economic activity.

Geopolitical stress, trade uncertainty and supply-chain pressures are therefore becoming increasingly important variables in economic forecasting and policy decisions.

Inflation framework remains a key strength.

India’s 2016 inflation-targeting framework, under which the RBI targets inflation at 4% with a tolerance band of +/-2%, remains an important economic strength.

Maintaining price stability is essential for sustainable long-term growth. While supply-side shocks may initially require government intervention, monetary policy becomes important when such shocks generate broader second-round inflationary effects.

India’s path could exceed current projections

Existing long-term projections suggest India could overtake Japan to become the world’s fourth-largest economy and subsequently surpass Germany to become the third-largest.

However, if India successfully capitalises on its demographic dividend and overcomes its structural challenges, its trajectory could be significantly stronger. Under such a scenario, India could potentially overtake the United States by the mid-2030s and China several years thereafter, emerging as the world’s largest economy.

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