India should become 3rd-largest economy in the world by 2028
What's the story
India is on track to become the world's third-largest economy by 2028, after the US and China, according to a recent report by UBS. The country's real GDP growth is expected to stabilize at around 6.5% year-on-year (YoY) between FY28-30. This strong growth trajectory will make India the third-largest consumer market in 2026 and the fastest-growing economy in the Asia-Pacific (APAC) region during that period.
Market dynamics
Consumer market growth outpacing global peers
UBS economists Tanvee Gupta Jain and Nihal Kumar co-authored a report highlighting that India's household consumption has nearly doubled in the last decade. It reached $2.4 trillion in 2024, with a CAGR of 7.9%, outpacing China, the US, and Germany.
Market outlook
Cautious outlook on Indian equities
Despite India's promising economic growth, UBS remains cautious on Indian equities. The firm believes that valuations still look expensive compared to the ordinary fundamental performance of companies. They also noted selling pressure from foreign investors and increasing IPO/capital-raising activity by corporates as factors to watch in this market scenario.
Trade impact
Two-sided risks to growth forecast
UBS's growth forecast for India is subject to two-sided risks, particularly uncertainty related to US trade policy and India's response. If the 50% trade tariff (including penalty) persists, it could drag growth by roughly 50 basis points in FY27. A 25% tax on payments made by US firms to foreign outsourcing services could lower India's growth by around 90 basis points in FY27, UBS warned.