Morgan Stanley: India to Experience Economic Boom

Driven by key investments and global trends, India is set to become the world’s third-largest economy by 2027, a Morgan Stanley Research Bluepaper predicts.

Already the fastest-growing world economy, with 5.5% average gross domestic product growth over the past ten years, the country is on track to pass Japan and Germany. By 2030, the report claims that India’s stock market will also be the third largest in the world.

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Global offshoring, digitalization, and energy transition, combined with strategic investment in technology and energy, have spurred growth. India, which has a population of nearly 1.4 billion, could see its GDP more than double by 2031, from $3.5 trillion to $7.5 trillion, according to Morgan Stanley.

“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,” said Ridham Desai, Morgan Stanley’s Chief Equity Strategist for India.

By 2031, India’s share of global exports could also double, and the Bombay Stock Exchange could experience 11% annual growth and reach a market capitalization of $10 trillion, the report says.

India’s economic boom could create changes with far-reaching impact, Morgan Stanley analysts say. The growth could mean the country will have an increased share of global manufacturing and expanded credit availability. Also, new businesses will likely crop up, consumer spending will rise, and quality of life will improve.

“In a world that is currently starved of growth, the opportunity set in India must be on global investors’ radar,” says Chetan Ahya, Morgan Stanley’s Chief Asia Economist. “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.”

India has been providing software development, customer service, and business processing to companies across the globe since the early days of the internet. Now, tighter global labor markets and the emergence of distributed work models may boost this practice, with global spending on outsourcing increasing from $180 billion to $500 billion by 2030.

India also began the groundwork for a digitalized economy more than a decade ago, establishing a national identification program called Aadhaar.

And the country has long viewed energy as critical to economic development, noting its impact on education, productivity, communication, commerce, and quality of life, Morgan Stanley says. All of India’s 600,000-plus villages have access to electricity, due to recent upgrades to transmission and distribution, among other changes. This could boost India’s daily energy consumption by 60% by 2032.