India will be third-largest economy by 2027, Morgan Stanley predicts
What's the story
The future of the Indian economy seems promising as the global financial services giant Morgan Stanley predicted that the country will become the world's third-largest economy by 2027. The expansion of public digital infrastructure as well as adjustments to policy to encourage investment and employment have been cited as the reasons for this. Currently, India is ranked number five in the world's economy rank.
Context
Why does this story matter?
Several factors, ranging from the COVID-19 pandemic to the Russia-Ukraine conflict, have put pressure on the Indian economy and impeded its progress. Despite these issues, the country's economy is rising steadily and outperforming forecasts. According to official figures, India's Gross Domestic Product (GDP) expanded by 13.5% in the April-June fiscal period, the quickest in the previous four quarters.
Estimation
Economy forecast for next decade
According to Morgan Stanley, India's GDP will rise from $3.4 trillion to $8.5 trillion during the next ten years. Every year, India is predicted to contribute $400 billion to its GDP which means only China and America will be ahead of India's economy. Meanwhile, Chetan Ahya, the company's Chief Asia Economist, stated that the prediction is justified by many domestic and global variables.
GST
Tax reforms improved economic landscape
Ahya cited the examples of the Goods and Services Tax (GST), a reduction in the corporate tax rate, and the implementation of incentive programs that are tied to the output of changes in government strategy. India is becoming a preferred location for businesses in a multipolar globe where supply chains are being diversified, he claimed.
Details
China position compared to India
Citing the example of China, Ahya said that India's economy today stands where it was in 2007. However, India's working population is growing in numbers, which means it will go a long way. Ahya said that taking all the factors together, India's real GDP will grow at a rate of 6.5%, while the Chinese economy will grow at an average rate of 3.6%.
Growth
India will develop at a fast pace: Ahya
India is entering a phase where income on a high basis will grow rapidly, said Ahya. He said India took 31 years since 1991 to become a $3 trillion economy, but it will take only seven years to add the next $3 trillion. According to him, the market cap of the Indian market may increase from $3.4 trillion to $11 trillion by 2034.
Digital front
India's distinct position on digital landscape
The forecast by the company also described India as different from other countries on the digital infrastructure front as it has built its public digital infrastructure, while other economies have resorted to private networks for this. More work is being done to improve it so that it will reduce the distance between business and customers and will provide ease of doing business, it said.
Rank
Surpassed UK to become fifth largest economy
Last year, the Indian economy overtook the United Kingdom to reach the fifth position. Talking about the size of the economy in cash, the Indian economy stood at $854.7 billion in the quarter that ended in March, while the size of the UK economy was $816 billion. 10 years ago the Indian economy was in 11th place in terms of size.