India will be in top 3 by 2027 in terms of absolute GDPMorgan Stanley India MD

By India Today Business DeskAs the Narendra Modi-led government completed nine years at the Centre, Morgan Stanley India MD, Ridham Desai, said a lot has changed in the last decade and “India will be in the top 3 by 2027” in terms of absolute GDP.

Morgan Stanley, in its latest report, hailed the Modi-led government and said that in a short span of 10 years, India has gained positions in the world order with significant positive consequences for the macro and market outlook.

The report, ‘India Equity Strategy and EconomicsHow India Has Transformed in Less than a Decade’, has predicted that India will emerge as a key driver for Asia and drive a fifth of global growth in the next decade.

At the end of the next decade, India’s Gross Domestic Product (GDP) will stand at $7.9 trillion by FY2032 in comparison with $ 3.1 trillion at this moment. The report states that India’s per capita income will increase from $2,200 currently to about $5,200 by FY2032.

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Talking to India Today about India’s growth, Morgan Stanley India MD, Ridhman Desai, said, “In terms of absolute GDP, India will be in the top 3 by 2027. In terms of per capita income, it will take a lot longer. At $5,200, we will become a mid-income economy. We won’t be as poor as we are today as a large portion of our population earns subsistence income. We will move out of that period in two years.”

The increase in GDP and per capita income will have major implications for change in the consumption basket, with an impetus to discretionary consumption.

On being asked about the impact of the growing economy on the gap between the rich and the poor, Desai said, “Inequality in India will decline as we grow more prosperous. Inequality rises when we are not able to increase GDP. This is the irony. The emphasis should be to get the economy to grow faster. So, to come out of poverty, it’s important to grow the economy. And at $5,200, we’ll have lower differences between the rich and the poor than we have today.”

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The report also compares the growth estimates of India with that of China. On this, Ridham Desai said, “China has had 30 years of stupendous growth and it is kind of over now. So, growth in China is decelerating very quickly. In fact, this year China’s population will decline and this is a major drag on their growth rate. Whereas, India is not going to have a 30-year sweep period. India’s sweep period will actually last a lot longer because we have much better demographic conditions than China.”

He added, “India may still be growing faster than China when you go at the turn of this century. There is a long way ahead for India to catch up with China and it will, eventually, and the gap will close down a lot by the end of this decade.”

“For the first time in the history of this country, the government is taking tax dollars and giving them to companies and telling them to go and invest. Now, this works very well for the country. When companies invest, they create jobs and when they create jobs, they create wages,” Ridham Desai explained.

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“Forces around the world are aligning in India’s favour. A lot of companies are looking to diversify away from China and India is a natural place to go to, because there are government incentives, there is a better environment to do business and most significantly, India is one of the best places in terms of markets. Companies will find it very attractive to be in India over the next ten years,” the Morgan Stanley India MD told India Today.

On being asked about India’s progress in the last 10 years, Ridham Desai said, “In terms of the digital economy, we have made far more progress than most of the world. However, we still need to add a lot more to our infrastructure because that is where we lag behind. In terms of soft metrics, like digital, services and exports, we are doing very well, but in hard stuff like infrastructure, we are behind. So, we have some more miles to travel before we can call ourselves a developed nation.”

“A lot has changed in the last ten years. India is no more as vulnerable or macro as it used to be. We have achieved a great amount of stability. The rupee, even though it seems to be depreciating, has actually been among the better-performing currencies in the world, ” Desai said.

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