India can become the world’s third largest economy by 2027

New Delhi (Uttam Hindu News): India’s importance as a global growth driver has increased as its contribution to world progress is expected to increase to 15 percent in 2022 and 17 percent in 2023-28. Earlier in 2021, India’s contribution was only 10 percent. Brokerage company Morgan Stanley said this in a report.

In US dollar terms, we expect India’s nominal GDP growth to accelerate to 12.4 per cent by FY2025, outperforming China, the US and the euro zone, the report said. It will be seven percent in financial year 2024. A higher growth rate would mean that India’s economy will grow at a strong compound growth rate despite a strong base. We expect nominal GDP to reach US$5 trillion by 2027, making India the third largest economy in the world.

It said, we expect the growth rate to remain at a strong rate of 6.4 percent in fiscal year 2024 and 6.5 percent in 2025. It will grow at an average rate of 6.6 percent from 2024 to 2028. “We have had a constructive view on India for some time now, highlighting that India offers the best domestic demand alpha opportunity within Asia. Economic data is strong and risk assets continue to perform well. “Against this backdrop, the debate among investors is whether this strong run can be sustained and what are the risk factors that need to be taken into account.”

Morgan Stanley has said that the most important driver of maintaining asset market performance is the investment cycle. The investment cycle has already improved, initially driven by a sharp uptick in public capital expenditure.

Some investors are looking to FDI data for evidence that India is benefiting from supply chain diversification. However, foreign direct investment inflows into India have declined from $70 billion in Q2FY21 to $33 billion in Q2FY23. It said that with the slowdown in global GDP and trade growth, global FDI inflows have moderated.

Additionally, there are some sector-specific factors, such as funding (from a venture capital and private equity perspective) for the Internet and related sectors, which has slowed down and is impacting the aggregates. Certainly, India has indeed achieved a higher share in global FDI inflows since 2017, the report said. Its share has increased from 2.4 percent in the fourth quarter of 2017 to 4.2 percent in the first quarter of 2023.

Another thing to note is that there are some gaps in implementation, where announcements have been made but actual investment has not happened yet. For example, we are still getting news about electronic manufacturing investment commitments from companies like Foxconn and Intel, which recently announced collaboration with eight companies to manufacture laptops in the country.