GDP to hit $6 trillion by 2027 on digital leap: Morgan Stanley

GDP to hit $6 trillion by 2027 on digital leap: Morgan Stanley

India is likely to be the world’s fastest-growing large economy in the next 10 years, driven by digitisation, favourable demographics, globalisation and reforms, predicts a report by Morgan Stanley.

According to the global financial services major, the trend line in India’s annual GDP (gross domestic product)growth has been accelerating to 6.9% in 2000s, from 5.8% in the 1990s, and this momentum is likely to continue in the next decade as well.

Morgan Stanley expects digitisation to provide a boost of 50-75 bps to GDP growth, and forecasts that India will grow to a $6-trillion economy and achieve upper-middle income status by 2026-27.

India’s GDP growth slipped to a three-year low of 5.7% in April-June, as disruptions caused by demonetisation spilled over to the third straight quarter amid slowdown in manufacturing activities.

Disruptive reforms

Experts believe that reforms over the past year have created disruption in India’s GDP numbers, but the medium-term growth potential of the country looks bullish.

“We expect India’s real and nominal GDP growth to compound annually by 7.1% and 11.2%, respectively, over the coming decade,” Morgan Stanley said in a research note.

Moreover, the country’s gross FDI (foreign direct investment) inflows are expected to amount to $120 billion by 2026-27, almost double the current 12-month trailing run rate of $64 billion.

The report noted that the impact of higher GDP growth is expected to get reflected in corporate earnings momentum.

“We think India’s stock market could be among the world’s best performers in the next 10 years, leading to India’s market cap rising from around $2 trillion to around $6 trillion,” the report stated.

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