India is expected to surpass Germany and Japan to become the third largest economy by 2028 but needs more focus on the social sector and ease of doing business and be consistent in reforms, according to British firm HSBC. Demographics and macro stability are the nation’s key strengths, it said.

HSBC estimates India will be a $7 trillion economy in 2028, compared to less than $6 trillion and $5 trillion for Germany and Japan respectively, a news agency reported quoting a report by HSBC economists. With a GDP of around $2.3 trillion in fiscal 2016-17, India at present stands fifth in global rankings.

Cautioning against ‘harmful’ stray reforms, the brokerage firm said social capital is "insufficient" and spending on aspects like health and education "is not just desirable for its (India's) own sake, but is also central to economic growth and political stability."

India will continue to be a services-oriented economy but needs to pay more attention to manufacturing and farm sectors. The e-commerce sector will create 12 million jobs over the next 10 years and the social sector can be another field for job creation, it said.

Due to the introduction of the goods and services tax (GST), the growth rate will be lower in fiscal 2017-18 compared to the previous year’s 7.1 per cent, but it will recover sustainably from next year. The informal sector, responsible for the bulk of jobs in India, may respond to higher taxation by shutting shop or laying off workers, it noted.

Other developments in the next decade will include higher investment and capital goods flow as the country’s focus on manufacturing increases, Indian consumers forcing foreign brands to turn 'glocal' and a two- way human capital footprint that will see many skilled people travelling overseas, HSBC added.