Why the world is bullish about the Indian economy?

A recent report by Morgan Stanley expects that India’s GDP is likely to surpass $7.5 trillion by 2031, making it the third-largest economy in the world.

Morgan Stanley (MS) Report:

• Morgan Stanley (MS), report titled “Why this is India’s decade”, states that “four global trends imply that India is set to become the third-largest economy within the coming decade due to:
  • Demographics
  • Digitalization
  • Decarbonization
  • Deglobalization
• India’s GDP is likely to surpass $5 trillion by 2031, more than double current levels.
• India’s per-capita income is expected to rise from $2,278 now to $5,242 in 2031, setting the stage for a discretionary spending boom.
• The number of households earning more than $35,000/year is likely to rise fivefold in the coming decade, to over 25 million.

What will trigger this rise?

• Off-shoring: In the post-Covid environment, global CEOs appear more comfortable with both working from home and working from India.
• In the coming decade, the number of people employed in India for jobs outside the country is likely to at least double to over 11 million.
• The all-time high MNC Sentiment Index shows, that Multinationals are more optimistic than ever about investing in India.
• Digital differentiation: IndiaStack, which operates at a population scale, is a transaction-led, low-cost, high-volume, small-ticket-size system with embedded lending that will take India from a ‘prepaid’ economy to a ‘postpaid’ (buy now, pay later) one.
  
  

  India Stack is a set of application programming interfaces (APIs) that allows governments, businesses, startups, and developers to utilize a unique digital Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery.

• Energy transition: Energy is a key to economic development, as it impacts education, productivity, communication, commerce, and quality of life.
  • India’s energy needs are still growing, and therefore legacy capacity using fossil fuels will not be destroyed as it transitions to a higher share of renewables.
  • All of India’s 600,000-plus villages have access to electricity, due to recent upgrades to transmission and distribution, among other changes.

What are the risks to these projections?

• Prolonged global recession or sluggish growth
• Adverse geopolitical developments
• Domestic politics and policy errors
• Shortages of skilled labor
• Steep rises in energy and commodity prices

Investing In the India Decade:

 The country gives investors a plethora of compelling reasons to invest in India.

• The largest youth population in the world
• Huge domestic market
• Flourishing economy
• Diverse sectors
• Governance
• Thriving infrastructure

Other reports favoring India's growth:

National Bureau of Economic Research (NBER): It publishes a paper titled: “The future of global economic power”. It has used the UN’s demographic data and IMF economic data to predict:

• China and India will become the world’s top two economies.
• The share of the US and Western Europe will shrink to just 12.3 percent and 11.9 percent, respectively.
• productivity growth and its interaction with demographic change are going to be the main drivers of future economic power.
• If recent productivity continues and demographic projections prove accurate, India will account for one-third of world output in 2100 and China for over one-fifth.