India may become third-largest economy, stock market before 2030: Morgan Stanley

India is likely to become the world’s third-largest economy and stock market before the end of the decade, according to investment bank Morgan Stanley.

“India has the conditions in place for an economic boom fueled by offshoring, investment in manufacturing, the energy transition, and the country’s advanced digital infrastructure,” the Morgan Stanley analysts, led by equity strategist Ridham Desai, said in a note on Tuesday.

India’s GDP is likely to surpass $7.5 trillion by 2031, more than double the current levels, and adding about $500 billion per annum on an incremental basis over the decade, the analysts said.

India’s market capitalisation is also likely to grow over 11 per cent annually to $10 trillion in the coming decade.

According to the report, the new India will drive a fifth of global growth through the end of this decade, led by offshoring, digital differentiation, and energy transition.

“India is reorientating its growth model towards encouraging investment and leveraging exports – taking it closer to the East Asian growth model, which has proved successful for many economies in lifting per-capita incomes. India’s economy is compounding at a strong rate on a high base and will be one of only three economies in the world that can generate more than US$400 billion in annual economic output growth,” pointed out Morgan Stanley.

Aided by the government’s push towards ‘Make in India’, it sees manufacturing’s share of India’s GDP rising to 21 per cent by 2031, implying an increase of $1 trillion worth manufacturing opportunity.

“If India is already the ‘office to the world’, it is increasingly becoming its factory as well. We anticipate a wave of manufacturing capex owing to government policies aimed at lifting corporate profits’ share of GDP via tax cuts and hard dollars for investing in specific sectors, and we note that performance-linked incentive (PLI) schemes now total $33 billion across 14 sectors,” the Morgan Stanley analysts said.

India’s global export market share is also likely to more than double to 4.5 per cent by 2031, providing an increase of $1.2 trillion in export opportunity, according to Morgan Stanley.

India’s services exports will almost treble to $527 billion from $178 billion in 2021 over the next decade, it said.

Morgan Stanley also sees India’s per-capita income rising from $2,278 now to $5,242 in 2031, setting the stage for a “discretionary spending boom.”

For instance, over 2021-2030, 25 per cent of incremental global car sales will be from India, it said.

“India should hit a major inflection point for the next residential property boom in 2030 – a confluence of high per-capita income, a mid-30s median age, and higher urbanisation,” according to Morgan Stanley.

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