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Business News/ Politics / Policy/  Worst behind for India’s growth story: Morgan Stanley
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Worst behind for India’s growth story: Morgan Stanley

A steady pace of policy reforms will lay the foundation for real GDP growth to average 6.75% over the next decade, says Morgan Stanley

Photo: AFPPremium
Photo: AFP

New Delhi: Investment bank Morgan Stanley on Monday said the worst is behind for India’s growth story and a steady pace of policy reforms will lay the foundation for real gross domestic product (GDP) growth to average 6.75% over the next decade.

“If our projections were to come to fruition, India’s economy would pass the $5 trillion mark (by 2025), a feat that has been achieved by only the US and China thus far, and would make India the fifth largest economy (from 10th currently) in the world. Accordingly, India’s consumption and investment opportunities would rise to $3.6 trillion and $1.9 trillion, respectively," it said in a report released on Monday titled The Next India: From a cyclical downturn to a structural upturn.

Credit rating agency Crisil Ltd said last month that there is only a 50% chance that growth will average 6.5% during the tenure of the next government, provided it gets a decisive mandate in the Lok Sabha elections—something that would speed up decision-making and improve the investment climate. The odds of being caught in a growth rate of around 5% is one in three if there is a fractured mandate, it added.

“India finds itself at a transition, where the cyclical downturn is receding. Given a stable political environment and an accelerated pace of reforms complementing the huge surge in working age population, India will be well positioned to deliver stronger economic and corporate profit growth," Neil Perry, director, Asia Research, Morgan Stanley, wrote in the preface.

The investment bank said India’s strong macro story also means money-making opportunities for stock market investors. “We explore this with three themes, namely: 1) the macro story leading to the next profit boom—we expect profit growth to average 14.6% over the coming decade; 2) the drivers for the rising household ownership of equities, given that equities could compound between 12% and 15% over the coming decade in local currency terms; and, ultimately, 3) India will remain a portfolio manager’s delight because of its intense stock-picking characteristics and, ultimately, how all this translates into stock market returns, which will likely make India one of the biggest equity markets in the world," it added.

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Published: 13 May 2014, 01:15 AM IST
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