Morgan Stanley's Ridham Desai highlights 10 positive changes in India in the past decade

Ridham Desai, Morgan Stanley: “The Prime Minister is a ‘inflation hawk’, which means that he doesn’t want inflation. This is very critical for the prosperity of the economy.”

Ridham Desai, Managing Director at Morgan Stanley India, said that over the last decade, India's global standing has improved significantly, owing primarily to supply-side policy reforms, formalisation of the economy and the introduction of laws such as the Insolvency and Bankruptcy Code and RERA.

In a report published on May 31 titled "India Equity Strategy and Economics: India's Transformation in Under a Decade," Desai underscored the significant progress India has made on the international front, resulting in favorable outcomes for both the broader macroeconomic environment and the outlook for the market.

"We run into significant skepticism about India, particularly with overseas investors, who say that India has not delivered its potential (despite it being the second-fastest-growing economy and among the top-performing stock markets over the past 25 years) and that equity valuations are too rich. However, such a view ignores the significant changes that have taken place in India, especially since 2014," said Desai.

Regarding supply-side policy reforms, Ridham Desai pointed out that India's corporate tax rates are now in line with those of its peer nations. He also stressed that there has been a notable acceleration in infrastructure development over the past eight years. This includes substantial expansions in the national highway network, an increase in broadband subscribers, and the electrification of railway routes, he noted.

Regarding the formalization of the economy, he highlighted the consistent growth in GST collections and the significant contribution of digital transactions, which now make up more than 76 percent of the GDP.

The chief economist also anticipates a growth in manufacturing and capital expenditure (capex) as a percentage of GDP. "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", he stated.

Desai also anticipates that India's share in the export market will grow to 4.5 percent by 2031, nearly double the levels seen in 2021. This growth will encompass both goods and services exports. Additionally, he noted that the rise in India's per capita income will bring about significant changes in the consumption patterns, with a notable boost in discretionary spending.