India to be third largest economy by 2030: S&P Global, Morgan Stanley

The beautiful and colorful skyline of Mumbai at dusk as seen from Currey Road, on February 16, 2022 in Mumbai, India.

Pratik Chorge | Hindustan Times | Getty Images

India is set to overtake Japan and Germany to become the world’s third largest economy, according to S&P Global and Morgan Stanley.

S&P’s forecast is based on the expected annual growth rate in India to be around 6.3% till 2030. Similarly, Morgan Stanley estimates that India’s GDP is expected to double from current levels by 2031.

“India has the conditions conducive to economic growth fueled by economic slowdown, investment in manufacturing, energy transition, and advanced digital infrastructure,” Morgan Stanley researchers led by Ridham Desai and Girish Acchipalia wrote in the report.

“These drivers have made it [India] the world’s third largest economy and largest market before the end of the decade.

India posted annual growth of 6.3% for the July to September period, slightly higher than the Reuters forecast of 6.2%. Prior to this, India recorded an increase of 13.5% in April to June compared to a year ago, boosted by strong domestic demand in the country’s utility sector.

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The country posted a 20.1% year-on-year increase in the three months to June 2021, according to Refinitiv data.

“These drivers have made it [India] the world’s third largest economy and largest market before the end of the decade.

S&P’s outlook depends on continued Indian trade and investment liberalization, labor market reforms, and investment in India’s infrastructure and public sector.

“This is a reasonable expectation from India, which has a lot of ‘touch’ in terms of economic growth and personal income,” Dhiraj Nim, an economist at Australia and New Zealand Banking Group Research, told CNBC.

Some of the changes mentioned have already been implemented, said Nim, showing the government’s commitment to invest more in the country’s annual budget.

Being an export driven capital

The Indian government is clearly looking to become a foreign investment and energy hub, and their main vehicle for doing so is through the Production Linked Incentive Scheme to boost manufacturing and exports, according to S&P analysts.

The so-called PLIS, which was launched in 2020, offers incentives to both domestic and foreign investors such as tax deductions and licensing, among other incentives.

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“It is likely that the government is maintaining PLIS as a tool to help India’s economy become more export-led and more connected to global supply chains,” S&P analysts wrote.

Workers repair metal at a cooking stove factory of GHG Reduction Technologies Pvt in Nashik, Maharashtra, India, Sunday, Nov. 13, 2022.

Dhiraj Singh Bloomberg | Getty Images

Similarly, Morgan Stanley estimates that India’s share of GDP “will rise from 15.6% of GDP at present to 21% by 2031” – which means that manufacturing costs could triple from the current $447 billion to about $1,490 billion, according to what they are doing. at the bank.

“Many people are more optimistic than ever about investing in India…

“The quality of India [include] more low-cost jobs, lower production costs, greater financial openness, more business-friendly policies and a growing consumer appetite,” said Sumedha Dasgupta, senior analyst at the Economist Intelligence Unit.

This makes India an attractive choice for setting up a manufacturing hub towards the end of the decade, he said.


The pressing factors that could challenge Morgan Stanley’s forecast include a prolonged global recession, as India is a highly trade-dependent country with about 20% of its output being exports.

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Other risks cited by the US bank include skilled workers, political activity and the risk of voting in a “weak government.”

A global slowdown could weaken India’s export business, India’s finance ministry said last Thursday.

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Although India’s GDP as a whole is already above pre-Covid levels, growth going forward will be “very weak” compared to previous quarters, said Sonal Varma, chief economist at Nomura.

“Real GDP is now 8% above pre-Covid in terms of growth… it will be a cyclical slowdown ahead.

Similarly, Mr. Nim said that more importance should be given to human capital through education and health.

“This is very important in the post-pandemic economy where the massive collapse of non-governmental organizations has led to an increase in economic and financial inequality,” he said, adding that the decline in the number of people involved in the workforce, especially among women, had an impact.


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