In its report on Friday, IHS Markit said that India will overtake the UK (United Kingdom) to become the world's fifth biggest economy in 2019 and is poised to surpass Japan to be the third largest in 2025. It forecasts Indian GDP (gross domestic product) to reach $5.9 trillion in 2025, surpassing Japanese GDP.

The London-based information services company in its latest annual Economic Survey has published an economic roadmap to 2025. It said that the key goal is to transform India from a $3 trillion economy in 2019 to a $5 trillion economy by 2025, which will lift it into the ranks of the world's upper-middle-income countries.

It has also forecasts the size of the Indian consumer market to increase from $1.9 trillion in 2019 to $3.6 trillion by 2025.

"As India continues to ascend in the rankings of the world's largest economies, its contribution to global GDP growth momentum will also increase," IHS said.

Challenges

But to achieve this, the country will have to create a virtuous cycle of investment, savings and exports in order to sustain rapid economic growth over the next five years.

The role of investment is seen as a critical enabler for innovation, rapid productivity growth and new technology, helping to boost jobs growth. The roadmap described in the latest Economic Survey highlights the importance of creating a favourable ecosystem for private investment, particularly in the new economy.

It said that accelerating the development of new economy startups and growing new unicorns is a critical strategy for creating value-added and skilled jobs growth.

India was ranked 77 out of 190 countries that are included on the World Bank's Ease of Doing Business Index for 2019 and was ranked 163rd in the world for contract enforcement.

It also recommends the hiring of additional judges to rapidly reduce the number of unfilled vacancies and clear long backlogs in the court system.

Another major priority would be changing labour market law to remove restrictive labour regulation.

Moreover, India's total population between 2015 and 2050 is projected to increase by around 350 million persons, creating significant fiscal challenges for the government in order to deliver adequate physical infrastructures such as electricity, sanitation, affordable housing and public transport.

At the same time, the population growth rate is also projected to slow rapidly over the next two decades, resulting in gradual ageing of the population, bringing additional fiscal challenges relating to healthcare, pensions and social welfare for senior citizens.

"Despite the wide range of economic challenges facing the nation, the economic outlook looks positive for the second term of the Modi-led BJP government, with GDP growth forecast by IHS Markit to average around 7 percent per year over the 2019-2023 period," it added.