Unprecedented Economic Growth: India’s Path to Becoming the Third-Largest Economy in the World

India is on the cusp of unprecedented economic growth, fueled by three key megatrends: global offshoring, digitalization, and energy transition. According to Morgan Stanley’s Chief Equity Strategist for India, Ridham Desai, the country is poised to surpass Japan and Germany to become the world’s third-largest economy by 2027. This growth is expected to be driven by a doubling of India’s GDP to over $7.5 trillion by 2031, along with a significant increase in global exports and stock market capitalization.

One of the key drivers of India’s economic growth is its role as the back office to the world, with companies increasingly outsourcing services such as software development and customer service to the country. In addition, India is set to become a manufacturing powerhouse, with multinational corporations showing high levels of interest in investing in the country. This could lead to a doubling of India’s export market share and a significant increase in manufacturing’s contribution to GDP.

India’s digital economy is also set to undergo a transformation, thanks to initiatives like Aadhaar and IndiaStack, which are making digital identity and payment systems more accessible. This could lead to a significant increase in credit availability, as well as a shift in income distribution that will drive consumer spending in the country.

Energy is another key focus area for India’s economic development, with the country set to increase its daily energy consumption by 60% over the next decade. The transition to renewable energy sources could reduce India’s reliance on imported energy and improve living conditions in the country.

While investing in India comes with its share of risks, including global economic downturns and domestic policy changes, the long-term growth potential of the country is undeniable. As India’s economy transforms, it is increasingly becoming a compelling growth opportunity for global investors, with the potential to follow a similar growth trajectory to China in the coming years.

For more insights on India’s growth outlook, investors can refer to Morgan Stanley’s report “Why This Is India’s Decade” and consult with their financial advisors for further analysis.