According to a recent report by Morgan Stanley, India, under the leadership of Prime Minister Narendra Modi, has undergone a significant transformation, positioning itself in the global order and emerging as a crucial driver of growth in Asia and worldwide.

The report emphasizes that skepticism surrounding India, particularly among foreign investors, overlooks the substantial changes that have occurred in the country, especially since 2014. It highlights how India today is vastly different from its state in 2013.

“In just 10 years, India has secured its place in the world order, resulting in significant positive implications for the macroeconomic and market outlook,” states the report. “India has undergone a remarkable transformation in less than a decade.”

The report outlines ten major changes that have transpired since Prime Minister Narendra Modi assumed office in 2014. These include bringing corporate tax rates in line with global peers, accelerating infrastructure investments, implementing the Goods and Services Tax (GST) to streamline taxation, witnessing a surge in digital transactions as a percentage of GDP, formalizing the economy, transferring subsidies directly to beneficiaries’ accounts, enacting the Insolvency and Bankruptcy Code, adopting flexible inflation targeting, focusing on foreign direct investment (FDI), and introducing favorable policies to support corporate profits and the real estate sector.

Morgan Stanley also predicts a surge in manufacturing and capital spending as a proportion of GDP. It anticipates India’s export market share to more than double to 4.5% by 2031, and the report forecasts India to emerge as a key driver for both Asian and global economic growth.

Addressing concerns about India’s potential raised by overseas investors, the report asserts that these views fail to acknowledge the significant changes that have unfolded in India since 2014. Despite being the second-fastest-growing economy and boasting one of the top-performing stock markets in the last 25 years, some critics argue that India has not fully delivered on its potential and that equity valuations are too high. However, the report argues that such a perspective overlooks the transformative policy choices made by India and their profound implications for the economy and market.

The report further predicts a shift in India’s consumption basket as per capita income rises from the current USD 2,200 to around USD 5,200 by F2032. It highlights India’s leadership in digital transactions and real-time payments on a global scale. Additionally, the report anticipates benign and less volatile inflation, implying shallower rate cycles and a favorable trend in the current account deficit.

While the report highlights the positive outlook for India, it also acknowledges key risks, including a global recession, a fragmented general election outcome in 2024, sharp increases in commodity prices due to supply disruptions, and shortages in skilled labor supply.

In conclusion, Morgan Stanley’s report sheds light on the remarkable transformation India has experienced since 2013, positioning it as a major player in the global arena and paving the way for sustained economic growth and market opportunities.