India Transformed In Less Than A Decade: Morgan Stanley Report
In a brief period of 10 years, India has advanced its position in the global order, yielding substantial positive outcomes for the macro and market outlook, as per a report from Morgan Stanley Research.
The report, titled "India Equity Strategy and Economics: How India Has Transformed in Less than a Decade," underscores 10 significant changes, predominantly attributed to India's policy decisions, and assesses their implications for the nation's economy and market.
"This India is different from what it was in 2013. 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. We present a snapshot of these changes and their implications," the report said.
It added, "We run into significant skepticism about India, particularly with overseas investors, who say that India has not delivered its potential (despite its being the second-fastest-growing economy and among the top-performing stock markets over the past 25 years) and that equity valuations are too rich."
It added, "However, such a view ignores the significant changes that have taken place in India, especially since 2014."
Morgan Stanley's Research identifies these 10 pivotal changes as supply-side policy reforms, the formalisation of the economy, the Real Estate (Regulation and Development) Act, digitisation of social transfers, the Insolvency and Bankruptcy Code, flexible inflation targeting, a focus on Foreign Direct Investment (FDI), India's equivalent to a 401(k) moment, government backing for corporate profits, and a multiyear high in Multinational Corporation (MNC) sentiment.
In presenting the data on supply-side policy reforms, the research examines figures related to India's corporate tax vis-à-vis its global peers and infrastructure. Over the past decade, India's base corporate tax rate has consistently remained below 25 per cent, while for new companies initiating operations before 24 March 2023, it stands at 15 per cent.
Regarding infrastructure development, the research incorporates factors such as national highways, broadband subscriber base, renewable energy, and electrification of railway routes.
In the formalisation of the economy, Morgan Stanley considers Goods and Services Tax (GST) collections, which exhibit an upward trajectory, and digital transactions, constituting 76 per cent of the Gross Domestic Product (GDP).
On 18 May 2023, Morgan Stanley projected that India is set to grow at 6.2 per cent in the current financial year 2023-24, with improving macro stability indicating that monetary policy may not need to adopt restrictive measures.
In a report titled "Asia Economics: The Viewpoint: Addressing the Pushback to Our Constructive View," authored by Chetan Ahya, Derrick Y Kam, Qiusha Peng, and Jonathan Cheung, Morgan Stanley states that India is benefiting from favorable winds—both cyclical and structural.
"We see healthy balance sheets sustaining the robust trends in domestic demand. Improving macro stability means the monetary policy will not have to turn restrictive, allowing the economic expansion to continue," the report said.
