India To Become Third-Largest Economy By 2027: According To Morgan Stanley

American multinational investment management and financial services company, Morgan Stanley, has revealed that India will become the third-largest economy in the world by the year 2027.

His forecast comes based on looking at the global trends and key investments the country has made in technology and energy, and adding that India will be surpassing Japan and Germany, and have the third-largest stock market by 2030.

“We believe India is set to surpass Japan and Germany to become the world’s third-largest economy by 2027 and will have the third-largest stock market by the end of this decade… Consequently, India is gaining power in the world order, and in our opinion, these idiosyncratic changes imply a once-in-a-generation shift and an opportunity for investors and companies.” Morgan Stanley’s chief equity strategist for India, Ridham Desai, said.

According to the estimate, India’s GDP might more than double its current level of $3.5 trillion to reach $7.5 trillion by 2031. Over that time, its percentage of global exports may also double, and the Bombay Stock Exchange (BSE) may have yearly growth of 11%, with a market capitalization of $10 trillion in the next ten years.

Chetan Ahya, chief economist (Asia) at Morgan Stanley, said, “In a world that is currently starved of growth, the opportunity set in India must be on global investors’ radar… India will be one of only three economies in the world that can generate more than $400 billion annual economic output growth from 2023 onward, and this will rise to more than $500 billion after 2028.”

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According to Desai, coming in again said that CEOs are more at ease with working from both their homes and India in the post-Covid era. He said, as global outsourcing spending rises from $180 billion annually to roughly $500 billion by 2030, the number of individuals hired in India for work outside the country is anticipated to at least double, reaching more than 11 million.

“Incrementally, India will add more than $400 billion to its GDP every year, a scale that is only surpassed by the US and China,” Morgan Stanley’s chief Asia economist Chetan Ahya wrote in Financial Times.

He said that the estimate is supported by a convergence of favorable domestic and international forces and noted a shift in the focus of policy from redistribution to fostering investment and employment growth.

He noted changes in government policy as examples of tax reforms, such as the Goods and Services Tax (GST), a reduction in the corporation tax rate, and the introduction of production-linked incentive programs.

India is becoming a preferred location in a multipolar world where businesses are diversifying their supply chains, he claimed.

“India is entering a phase where incomes will be compounding at a fast rate on a high base. For context, India took 31 years since 1991 to raise its GDP by $3 trillion. According to our projections, it will take just another seven years for the GDP to grow by an additional $3 trillion,” he said.

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In terms of digital infrastructure, he also made a distinction between India and other economies. While other economies have opted for private networks, India has created a public digital infrastructure based on Aadhaar.

He said further layers are being built that will leverage this digital infrastructure to better match consumers and businesses and ease the cost of doing business.

In this regard, he cited the example of the Open Network for Digital Commerce (ONDC), which is touted to be the equivalent of UPI (unified payment interface) in e-commerce.

“The shift in India’s policy approach is moving it closer to the East Asian model of leveraging exports, raising savings, and recycling it for investment,” Ahya noted.

Citing the example of China, he said India’s GDP today is where China’s was in 2007 – a 15-year gap.

“Multinationals are now buoyant about the prospects of investing in India, and the government is helping their cause by investing in infrastructure as well as supplying land for building factories,” said Upasana Chachra, chief economist (India) at Morgan Stanley.

According to Morgan Stanley research, international firms’ perceptions of India’s investment outlook are at an all-time high. By 2031, manufacturing’s share of India’s GDP might rise from its present level of 15.6% to 21%, more than doubling the country’s export market share.

It said that customers in India probably had higher disposable income as well. The income distribution in India may change over the following ten years, and as a result, the country’s overall consumption may more than double, from $2 trillion in 2022 to $4.9 trillion by the end of the ten years. Non-grocery retail, which includes, among other things, apparel and accessories, leisure and recreation, and household goods and services, will see the biggest gains.

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Source: NDTV.Com