India is already the fastest-growing economy in the world, having clocked 5.5% average gross domestic product growth over the past decade. Now, three megatrends—global offshoring, digitalization and energy transition—are setting the scene for unprecedented economic growth in the country of more than 1 billion people.
“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,” says Ridham Desai, Morgan Stanley’s Chief Equity Strategist for India. “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.”
All told, India’s GDP could more than double from $3.5 trillion today to surpass $7.5 trillion by 2031. Its share of global exports could also double over that period, while the Bombay Stock Exchange could deliver 11% annual growth, reaching a market capitalization of $10 trillion in the coming decade.
In a new Morgan Stanley Research Bluepaper, analysts working across sectors look at how this new era of economic development could bring about staggering changes: boosting India’s share of global manufacturing, expanding credit availability, creating new businesses, improving quality of life and spurring a boom in consumer spending.
“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.”