Are India’s stars finally aligning?

Last year India became the fifth largest economy in the world and the country’s GDP exceeded USD 3 trillion. In 2022 and 2023, India is the only major economy expected to deliver a robust real GDP growth of about 7%, accounting for about 22% of global growth. Is India at the cusp of delivering long term sustainable growth and how can investors participate?

Policy reforms turn pro growth

In the last few years, several crucial supply side reforms have been rolled out which could help India achieve sustainable economic growth in the future. One of the most important initiatives has been a shift towards higher levels of profit contribution to the country’s GDP. It included a reduction in corporate tax rates for new manufacturing from 25% to 15% in 2019, and several production-linked Incentive programmes. To a large extend, this replicates the South Asian model of export and investment cycle driven economic growth, that we have also seen play out in other economies successfully in the past. Other reforms include the unified Goods and Services Tax Law, the Real Estate Regulation Act and the Bankruptcy Code. In addition, India has also benefitted from a benign external environment and the diversification of global supply chains, which led to an increase in direct foreign investment.  

GDP growth estimates for major regions

Economic Estimate Comparison - Real GDP Growth

Themes with exponential growth opportunities

As a result, we are seeing offshoots of growth in several areas that might have the potential to deliver high economic growth over many years.

  • Investment cycle revival. As India’s policy focus shifts to increasing capex investment, the obvious beneficiary is booming demand for credit and lenders. Considering that many Indian financial institutions have learnt how to leverage the use of technology, and the current level of credit is less than 60% of India’s GDP, we believe that credit demand has a growth potential of around 15% (annualised) for years to come. Infrastructure expansion is another theme that is likely to potentially help generate economic growth over many years, as the government announced an expansion of freight corridors and port capacities.
  • Manufacturing. Driven by three key drivers – increased efforts on diversifying global supply chain, the government’s production-linked incentives in 14 sectors and low production costs compared to developed countries. We believe that India’s manufacturing output has the potential to grow three-fold by 2031. Indian exporters in manufacturing and automation are well positioned to leverage this growth opportunity.
  • Energy transition. India’s commitment at the COP26 summit focused on reducing carbon emissions but also on increasing contribution from renewable energy. However, for a country which faced rapidly growing energy requirements, it becomes imperative that a larger proportion (almost 2/3 by end of this decade) of new energy supply comes from clean sources, primarily solar, biofuels and hydrogen. We think that would create about USD700bn in renewable energy capex opportunities.
  • Digital services. As global enterprises look to embrace the digital transition and global technology capex continues to rise, Indian services exporters could find a new growth engine in form of digital solutions, with the possibility to almost treble in value over next 10 years, to over USD 500bn. Beneficiaries from this significant secular trend will include not only the largest Indian IT corporates but also niche digital solution players.

Taking on the growth baton

As a confluence of positive factors materialise, India looks well poised to deliver sustainable real GDP growth of 6%-7% a year over several years. This is a level, which in musical terms is prestissimo[1], not only is above the global average in a world economy which is currently slowing down, but it would also represent a significant one fifth of global GDP growth.

For investors, this could be opening doors to exponential growth opportunities in several areas which we highlighted above. In fact, according to a recent study from Bloomberg, the Indian market witnessed more of its stocks rising by over 10 times (or “10 x baggers”) than any other major stock market over the past decade.

% share of "10-Baggers" in a decade

It is perhaps for this reason that while most regions went through a major equity market correction in 2022, Indian equities continued reaching new all-time highs. While predicting short- to medium-term market movements is an impossible task, looking over the long term, one thing is clear to us - at last, stars seem to be aligning for the country after a long time.


References: MS Blue Paper on India.


  1. GDP growth estimates: FactSet estimates
  2. GDP growth contribution as % of global GDP growth: MS Blue paper p 15
  3. Credit growth estimates: MS Blue paper p 12
  4. Multi bagger study from Bloomberg here: Chasing multi-baggers? India has had more stocks rising 10-fold | Insights | Bloomberg Professional Services



All our investment strategies involve risks, including the risk of loss of capital. The main risks associated with our Emerging markets Equity strategy are: Risk of capital loss, Equity risk, Interest rate risk, Currency risk, Liquidity risk, Derivative risk, Emerging market risk, ESG Investment Risk, Risk on A-Shares (China).

Past performance of a given financial instrument or index or an investment service or strategy, or simulations of past performance, or forecasts of future performance does not predict future returns.


[1] adj, prestissimo (not comparable) (music) Extremely fast, the fastest possible tempo.

  • Vivek Dhawan
    Vivek Dhawan
    Portfolio Manager / Client Portfolio Manager / Emerging Markets Equity Analyst

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