India To Become World’s Third-largest Economy By 2027: Morgan Stanley

India is set to surpass Japan and Germany to become the world’s third-largest economy by 2027 and will have the third-largest stock market by the end of this decade, says a new report by Morgan Stanley.

By 2031, India's GDP, which is currently USD 3.5 trillion, could more than double to USD 7.5 trillion. Its global export share could also double over that period. Whereas the Bombay Stock Exchange might expand by 11 per cent annually, with a market cap of USD 10 trillion in the next ten years.

“We believe India is on track to surpass Japan and Germany to become the world’s third-largest economy by 2027 and will have the third-largest stock market by the end of this decade. The country is gaining power in the world order, and in our opinion these idiosyncratic changes imply a once-in-a-generation shift and an opportunity for investors and companies,” says Ridham Desai, Morgan Stanley’s Chief Equity Strategist for India.

Desai further stated that in the post-Covid environment, CEOs are more comfortable with both 'work from home' and 'work from India.' In the coming decade, the number of people employed in India for jobs outside the country is likely to at least double, reaching more than 11 million, as global spending on outsourcing swells from USD 180 billion per year to around USD 500 billion by 2030.

On India's dependence on fossil fuels, the report stated that an estimated two-thirds of India's new energy consumption would come from renewable sources, including biogas and ethanol, hydrogen, wind, solar, and hydroelectric power. 

Renewable power might lessen India's dependency on imported energy and enhance living conditions, as 14 of the 20 cities with the highest levels of air pollution are in India, it said.

However, the report added that the country will still need to use fossil fuels to meet its expanding energy needs.

Expanding on the investment environment in India, the report said, "Investing in India is a long-term theme, and one that comes with its share of risks, including prolonged global recession, adverse geopolitical developments, domestic policy changes, lack of skilled labour, energy shortages and commodity volatility."