India is poised to become the world's third-largest importer by 2050 with a 5.9% share of global imports, following China and the United States (US), according to a new report by the UK'S Department of International Trade.
Currently, India is on the eighth spot on the list of largest importing countries with a 2.8% share. The country will jump to the fourth position by 2030 with a 3.9% share, according to the report titled 'Global Trade Outlook'.
The US's and the EU's share of most import sectors is expected to decline out to 2030 as the growing purchasing power of Asia's middle-class accounts for a rising share of global import demand.
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"This change is particularly marked in the food, travel and digital services sectors where larger and increasingly wealthy populations in the Indo Pacific are expected to consume more discretionary goods and services," it noted.
The report further revealed that the world's centre of economic gravity has been shifting eastward for decades - causing trade patterns to shift as it moves.
"Between 2019 and 2050, 56% of global growth is expected to come from the Indo Pacific, compared with a quarter from the EU and North America combined. Growth within the Indo Pacific is also expected to rebalance over time, with South Asia's contribution (driven by India) rising," it added.
China is a major driver of this economic shift as it is expected to become the world's largest economy by 2030 and has already displaced the US in Purchasing Power Parity (PPP) terms (which account for differences in local prices) in the mid-2010s.
But based on market exchange rates, which are more relevant for trade, "the overtake is expected to happen around 2030 . At that point both countries will account for around 22% of global GDP," the report stated.
It also pegged that India would leap to the third position by 2050 in the ranking of the world's largest economies, following China and the US, with a 6.8% share in global GDP.
Currently, India stands fifth in size of the world's economies with a 3.3% share. The country's GDP is pegged to surpass Germany by 2030 to become the fourth-largest economy.
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"The role of emerging economies in the trading system will rise over time, consistent with their growing weight in the global economy," the report noted.
It added that the 'E7 group' of the seven largest emerging economies - China, India, Brazil, Russia, Indonesia, Mexico and Turkey - are expected to equal the G7's share of global import demand by 2050. The E7 grouping comprises the seven richest nations of the world - the US, UK, Canada, France, Germany, Japan, and Italy.
"In the first two decades of this century, labour productivity growth (the main driver of higher living standards) was three times faster on average across the seven largest emerging economies than across the G7," the report said.
As a result, it added, the G7's share of global GDP fell from 65% in 2000 to 46% in 2020, while the 'E7's' share rose from 11% to 28%. Over the next thirty years, labour productivity growth across the E7 is expected to grow at roughly twice the rate of the G7, with the E7 overtaking the G7 in economic size during the 2030s.
"This shift in economic power is likely to mean emerging economies will play a growing role in the global trading system," the report noted.
However, it forewarned that while the emerging economies have significant 'catchup' potential, they also face major challenges - including the need to shift from imitation to innovation to escape the middle-income trap, tackle indebtedness, and rebound from the COVID-19 pandemic.