India under PM Modi to emerge as key driver of global growth: Morgan Stanley lists 10 transformations since 2014
The Morgan Stanley report has noted that significant scepticism about India, particularly with overseas investors, ignores the significant changes that have taken place in India, especially since 2014
PremiumAmerican multinational investment bank and financial services company Morgan Stanley has recently released a report where they have stated that India under Prime Minister Narendra Modi has transformed gaining a position in the world order and becoming a key driver for Asia and global growth since 2014.
This report comes at a time, when the Prime Minister Narendra Modi and the Bhartiya Janata Party (BJP) have amped up efforts to maintain a ‘double-engine’ government in various upcoming state assembly elections, ahead of the very crucial 2024 Lok Sabha Elections.
The Morgan Stanley report has noted that significant scepticism about India, particularly with overseas investors, ignores the significant changes that have taken place in India, especially since 2014.
"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," it said. "India has transformed in less than a decade."
Morgan Stanley in their report India Equity Strategy and Economics: How India Has Transformed in Less than a Decade listed ten big changes that have happened since PM Modi took office in 2014
-Supply-side policy reforms
-Formalization of the economy
-Real Estate (Regulation and Development) Act
-Digitalizing social transfers
-Insolvency and Bankruptcy Code
-Flexible inflation targeting
-Focus on FDI
-India's 401(k) moment
-Government support for corporate profits
-MNC sentiment at multiyear high
The report noted that from the introduction of GST to the rise of digital transactions, India is undergoing an economic revolution. The formalisation of the economy is fostering transparency, boosting tax collections, and empowering businesses.
Bringing corporate tax at par with peers and infrastructure investment picking pace are one of the biggest supply-side policy reforms.
Transfer of subsidies to accounts of beneficiaries, insolvency and bankruptcy code, flexible inflation targeting, focus on FDI, government support for corporate profits, a new law for real estate sector and MNC sentiment at multi-year high were other significant changes, it said.
The adoption of Flexible Inflation Targeting has resulted in a lower inflation rate compared to the high inflation period of 2009-14, primarily driven by relaxed monetary/fiscal policy.
This strategic approach is navigating India's economy towards stability and progress. Despite global crises induced by the pandemic, the report suggests India has effectively managed inflation.
Decreased correlation with oil prices and US recession shows reduced reliance on foreign portfolios & global capital flows. Building a more robust economy.
All these have led to a profit boom for corporate and stock market investors and a breakdown in correlation with global oil prices. "Indian stocks have become more defensive," it said.
The steady increase in manufacturing and capex as a percentage of GDP is likely to result in "a new cycle in manufacturing and capex, as we estimate the share of both to rise in GDP by approximately 5ppt by 2031," it said, adding India's export market share will rise to 4.5 per cent by 2031, nearly 2x from 2021 levels, with broad-based gains across goods and services exports.
Key risks however remain a global recession, a fragmented general election outcome in 2024, a sharp rise in commodity prices due to supply outages and shortages in skilled labour supply.
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