According to investment bank Goldman Sachs, as India's population of 1.4 billion people becomes the world's largest, its GDP is forecast to expand dramatically.

India is presently the world's fifth-largest economy, trailing Germany, Japan, China and the US.

"Over the next two decades, the dependency ratio of India will be one of the lowest among regional economies," said Santanu Sengupta, Goldman Sachs Research's India economist. 

Sengupta added that the key to drawing out the potential of India's rapidly growing population is boosting participation within its labour force, as well as providing training and skills for its immense pool of talent.

He also forecasted that India will have one of the lowest dependency ratios among large economies over the next 20 years.

"So that really is the window for India to get it right in terms of setting up manufacturing capacity, continuing to grow services, continuing the growth of infrastructure," Sengupta said.

Moreover, the report said that innovation and increasing worker productivity are going to be important for the world's fifth-biggest economy.

Capital investment will also going to be a significant driver of growth in the future. 

With falling dependency ratios, rising incomes, and deeper financial sector development, India's savings rate is expected to rise due to favourable demographics.

"On this front, the government has done the heavy lifting in the recent past. But given healthy balance sheets of private corporates and banks in India, we believe that the conditions are conducive for a private sector capex cycle," the report said.

Further, the report mentioned that the main downside risk for India's economic growth would be if the labour force participation rate does not increase. 

"The labour force participation rate in India has declined over the last 15 years. If you have more opportunities -- especially for women, because the women's labour force participation rate is significantly lower than men's -- you can shore up your labour force participation rate, which can further increase your potential growth," the report noted.

As India has a current account deficit, net exports have also been a drag on growth, according to the report.

However, the report emphasised that services exports have helped to cushion current account balances.

Unlike many more export-dependent economies in the region, India's economy is driven by domestic demand, with up to 60 per cent of its growth attributed to domestic consumption and investment, the report stated.