Morgan Stanley hails India for its growth in last 10 yrs

“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 stated.

According to the report, the 10 big reforms in India are in – 1. Supply-side Policy Reforms; 2. Formalisation of the Economy; 3. Real Estate (Regulation and Development) Act; 4. Digitalizing Social Transfers; 5. Insolvency and Bankruptcy Code; 6. Flexible Inflation Targeting; 7. Focus on FDI; 8. India's 401(k) Moment; 9. Government Support for Corporate Profits and 10. MNC Sentiment at Multiyear High.

Incidentally, the report is published ahead of Indian Prime Minister Narendra Modi’s US visit in June.

Also, India is going to elections in 2024. “We expect a new cycle in manufacturing and capex, as we estimate the share of both to rise in GDP by approximately 5ppt by 2031,” the report stated.

It added: “We estimate that India's export market share will rise to 4.5 percent by 2031, nearly 2x from 2021 levels, with broad-based gains across goods and services exports.”

As India's per capita income increases from US$2,200 currently to about US$5,200 by F2032, this will have major implications for change in the consumption basket, with an impetus to discretionary consumption, the report predicted.

“The share of profits in GDP has doubled from all-time lows hit in 2020 and is set to rise further – maybe even double from here – leading to strong absolute and relative earnings. This explains India's apparently rich headline equity valuations.

"Triggered by supply-side reforms by the government, we expect a major rise in investments, a moderation in the CAD, and an increase in credit to GDP to support the coming profit growth,” the report stated.

“We believe India's structural transformation will feed into the saving-investment dynamics, implying gains for its external balance sheet, with a progressively narrower trend in the CAD,” it stated.

The report further underlined that as India's reliance on global capital market flows has reduced, the market's sensitivity to a US recession and US Fed rate changes also seems to be fading.