India can attain a higher GDP growth of 7-8 per cent annually to become the third largest economy after the US and China by 2020, if reforms are pursued more aggressively, according to Deutsche Bank chief economist Norbert Walter.
"The continuation of the reform process will allow India to stay on a high growth path of around six per cent per year over the next 10-15 years. If reforms were pursued more aggressively, the real GDP growth could reach 7-8 per cent," Walter said at seminar in Indo-German Chamber of Commerce.
India will become the fastest growing economy out of the 34 developed and emerging markets and world's third largest economy trailing US and China by 2020, he said.
"Also, India's GDP per capita will double from roughly $2,500 at purchasing power parity to almost $5,000 in 2020," he said.
These projections by the German banking major are based on projections about India's favourable demographics, increasing investment in education and infrastructure and further integration with the world economy.
With higher growth, Walter said India will see emergence of a larger and richer consumer market.
The country will also see a change in consumption pattern with expenditure on healthcare, transport and communications going up substantially, he said.
"Household savings will increase, given the large amount of people entering the working class phase," he said, adding there will be rising demand for diversified financial instruments to invest those savings.
Walter identified IT, textiles, auto-ancillary and pharma industries as the fastest growing sectors given India's comparative advantages and current sectoral trends.
Moreover, he said, "the banking sector has enormous catch-up potential which is likely to be unleashed by the new domestic investment landscape, gradual privatisation and opening up to foreign banks."
While India has made significant strides in opening its economy, he said there are still remnants of its "inward-looking development strategy".
India's trade volumes as share of GDP was still meagre when compared to other Asian countries while its import tariffs still remain comparably high.
However, recent discussions on expanding trade agreements with China, Singapore, Thailand and other Asean countries attest to India's resolve to gain further access to world trade.