On the back of favourable domestic policies and a focus on boosting investment and jobs, India will become the third-largest economy by 2027 after the US and China. This will propel its GDP from $3.4 trillion currently to $8.5 trillion over the next decade, says Chetan Ahya, chief Asia economist at Morgan Stanley in an article published in The Financial Times.
As India's economy grows manifold, it'll add $400 billion to the economic growth every year and its m-cap will rise from $3.4 trillion to $11 trillion by 2032, the economist said. This will increase the income levels of people in the country at a fast rate. "India took 31 years since 1991 to raise its GDP by $3tn. According to our projections, it will take just another seven years for GDP to grow by an additional $3tn,” the article said.
Morgan Stanley's projections sync well with India's aim to achieve a $5 trillion economy status by FY25. However, the global financial body IMF (International Monetary Fund) projected in May 2022 that India's $5 trillion economy target will be achieved only by FY29. It said India's nominal GDP (gross domestic product) will rise to $4.92 trillion by FY28. This means the country will touch the $5 trillion economy mark in the financial year FY29.
As compared to China, though India's economy stands where China was in 2007, its working-age population is relatively young -- India's median age is 11 years younger than China's -- and is expected to contribute to its GDP in the longer run. Also, the coming decade, projects Morgan Staley, will see the Indian economy growing at an average of 6.5% and China's at 3.6%.
So what are the factors playing out in India's favour? As per the New York-based investment management and financial services major, initiatives like goods and services tax (GST), major corporate tax cuts, and PLI schemes -- all have contributed to making India's a strong alternate to China. Like the neighbouring country, India is also pushing hard on increasing government investments in public infrastructures like roads and railways.
What's more advantageous, says Morgan Stanley, is that India is spending heavily on scaling its digital infrastructure as well, which includes initiatives like Aadhaar. More such programmes, including an open network for digital commerce (ONDC), an initiative for all aspects of the exchange of goods and services over digital networks, will further improve the ease of doing business in the country, says Morgan Stanley.
Meanwhile, the IMF in September projected India will become the world’s third-largest economy after the U.S. and China by 2030 on rapid population growth and healthy manufacturing sectors. India had become the world's fifth largest economy in the world in March-end 2022 after it replaced the U.K., which ruled the Indian sub-continent for around 200 years.