10 transformational changes that have happened in India over the last decade are now set to propel the country to doubling per capita income, doubling export market share, raising the share of manufacturing, boosting corporate profits, and significantly improving other economic health indicators, said Morgan Stanley.. In its latest report titled ‘How India has Transformed in Less than a Decade’, global investment bank accredited policy changes, such as DBTs, supply-side policy reforms, and modification of the IBC, that led to overwhelmingly positive changes, influencing India’s macroeconomic situation, global standing and local share markets for the better.
Ridham Desai, MD, Morgan Stanley India, also countered global opinions that India has underperformed, saying, “We run into significant skepticism about India, particularly with overseas investors, who say that India has not delivered its potential (despite its being the second-fastest-growing economy and among the top-performing stock markets over the past 25 years) and that equity valuations are too rich. However, such a view ignores the significant changes that have taken place in India, especially since 2014.” In order to demonstrate his rationale, the report focussed on ten key changes which have had far-reaching consequences and implications for the economy and market.
The ten changes highlighted by Morgan Stanley are:
Supply-side Policy Reforms
Formalisation of the Economy
Real Estate (Regulation and Development) Act
Digitalizing Social Transfers
Insolvency & Bankruptcy Code
Flexible Inflation Targeting
Focus on FDI
India’s 401(k) Moment
Government Support for Corporate Profits
MNC Sentiment at Multi-year High
The implications of these changes on the economy
The primary impact of the changes is the steady rise of manufacturing and capex as a proportion of the GDP. Morgan Stanley projected that the share of both will gain by 5 percentage points each. Additionally, India’s export market share will rise to 4.5% by 2031, which is nearly twofold from 2021 levels, while the per capita income is expected to clock in at $5,200 within the next decade. “This will have major implications for change in the consumption basket, with an impetus to discretionary consumption,” said the report, adding, “We expect India’s real growth to average 6.5% in the next 10 years, making India the third-largest economy at nearly $8 trillion by 2031, up from fifth-largest currently.
10 transformations put India’s economy on a rocket: Morgan Stanley
