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India to become world’s third-largest economy by 2028, GDP growth projected to hit $5.7 trillion: Morgan Stanley
- India's economy is projected to expand to $4.7 trillion in 2026, making it the fourth largest in the world behind the US, China, and Germany. Morgan Stanley estimates India will overtake Germany with a growth expansion of $5.7 trillion in 2028.
India is projected to become the world's third-largest economy by 2028, with its economic growth set to hit $5.7 trillion in the next three years. According to Morgan Stanley, by 2028, India will become the world's most sought-after consumer market with a higher share in global output, driven by macro stability-influenced policy and better infrastructure.
From a $3.5 trillion economy in 2023, the Indian economy is projected to expand to $4.7 trillion in 2026, making it the fourth largest in the world behind the US, China, and Germany. In 2028, India will overtake Germany as its economy expands to $5.7 trillion. According to Morgan Stanley, India was the 12th largest economy in the world in 1990, but it slipped to the 13th position in 2000 before rising to the ninth rank in 2020 and fifth in 2023.
India GDP growth estimates
India's share of the world's GDP is projected to rise from 3.5 per cent to 4.5 per cent in 2029. The report projects three scenarios for India's growth: Bear, where the economy expands to $6.6 trillion by 2035 from $3.65 trillion in 2025; Base, where it grows to $8.8 trillion; and Bull, where the size balloons to $10.3 trillion.
It saw GDP per capita rise from $2,514 in 2025 to $4,247 in the Bear scenario in 2035, $5,683 under the Base scenario, and $6,706 under the Bull scenario. Regarding present times, Morgan Stanley said growth is likely recovering.
"India is likely gaining share in global output in the coming decades driven by strong foundational factors, including robust population growth, a functioning democracy, macro stability influenced policy, better infrastructure, a rising entrepreneurial class and improving social outcomes."
“The implication is that India will be the world's most sought-after consumer market, it will undergo a major energy transition, credit to GDP will rise, and manufacturing could gain share in GDP,” said Morgan Stanley in its report.
“High-frequency indicators were mixed in recent weeks but are distinctly better than a few months ago. We expect growth to recover after a 2H24 (second half of 2024) slowdown on fiscal and monetary policy support, with recovery in service exports.” The global brokerage expected India's GDP to be 6.3 per cent in the fiscal year ending March 31 and 6.5 per cent next.
Morgan Stanley on Indian economy
“Macro-stability should remain in the comfort range, providing flexibility to policymakers," said the report. Going forward, the country's consumption recovery is expected to be broad-based as the income tax cuts propel urban demand, supporting the buoyant trend in rural consumption.
Within investments, public and household capex drove growth, while private corporate capex recovered gradually. The strength in services exports bodes well for the labour market outlook, with moderating inflation likely to improve purchasing power. Domestic demand may emerge as the key driver of growth, bolstered by policy support on the monetary and fiscal front.
Headline CPI has cooled off from its near-term peak to track close to four per cent, driven by moderating food prices while core inflation continues to remain well-behaved. The outlook for headline inflation hinges on food prices (46 per cent of the CPI basket), which is expected to soften in the coming months.
Morgan Stanley expected inflation to be 4.3 per cent year-on-year in FY2026-27, lower than 4.9 per cent in FY2025. On the monetary policy front, the Reserve Bank of India (RBI) is easing across all its levers -- rates, liquidity and regulations. It embarked on a rate easing cycle in the February policy, and Morgan Stanley expected another 25 bps rate cut in April.
On the fiscal side, the Budget aims to reinforce growth recovery by spurring consumption (through income tax cuts) and spending mix in favour of capex while keeping macro stability in check by maintaining fiscal prudence.
Stating that risks to growth stem from external factors, it said, "We closely monitor developments on trade and tariff policies by the US government, alongside the strength in the dollar, US Fed's reaction function and global growth and financial conditions.
On the domestic side, we track fiscal profligacy at the state level and/or any change in policy mix that would weigh on macro stability". The most crucial cue will likely be global, including US policy and global growth rates. "A global recession or a near recession will challenge our call and keep the Indian equities off highs in 2025," it added.
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Business NewsEconomyIndia to become world’s third-largest economy by 2028, GDP growth projected to hit $5.7 trillion: Morgan Stanley
First Published:13 Mar 2025, 07:49 PM IST
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