‘This India is different from 2013’: Morgan Stanley releases a report

New Delhi: US-based global investment bank Morgan Stanley has released a report detailing the transformation of India under the Narendra Modi government. In a major endorsement for the Modi government, the Morgan Stanley report highlights how the government’s policy choices have led to significant changes in India, especially since 2014.

“This is a different India from 2013. In a short span of 10 years, India has moved ahead in the world order with significant positive consequences for the macro and market outlook,” the report said.

The report, India Equity Strategy and Economics: How India Has Transformed in Less than a Decade, highlights 10 major changes, mostly due to India’s policy choices and their implications for the economy and markets.

Morgan Stanley researched these 10 big changes: supply-side policy reforms, formalization of the economy, Real Estate (Regulation and Development) Act, digitization social transfer, Insolvency and Bankruptcy Code, flexible inflation targeting, focus on FDI, India’s 401 (k) ) Momentum, government support for corporate gains and MNC sentiment at multi-year high at the time of filing of the report.

Listing 10 major changes that have taken place since Prime Minister Narendra Modi took office in 2014, the brokerage said bringing corporate tax at par with peers and ramping up infrastructure investment are among the biggest supply-side policy reforms Is.

Furthermore, the rising collection of GST – a uniform tax that replaced over a dozen different central and state taxes – and the growing share of digital transactions as a percentage of GDP indicate formalization of the economy.

It said transfer of subsidies to beneficiaries’ accounts, Insolvency and Bankruptcy Code, flexible inflation targeting, focus on FDI, government support for corporate profits, a new law for the real estate sector and MNC sentiment at multi-year high. is on the level. Change.

Also, there has been a large shift in the consumption basket following low volatility in inflation and low interest rate cycles.

All this has led to a rise in profits for corporate and stock market investors and a decline in correlation with global oil prices. It said, ‘Indian stocks have turned more defensive’.

“A new cycle in manufacturing and capex is likely to result in continued growth in manufacturing and capex as a percentage of GDP, as we estimate that the share of both in GDP will rise to around 5ppt by 2031.” Its market share is projected to be 4.5 percent by 2031, nearly 2 times the 2021 level, with broad gains in exports of goods and services.

“As India’s per capita income is projected to increase from the current $2,200 to around $5,200 by 2032, this will have major implications for shifting the consumption basket, with a boost to discretionary consumption,” the report said. “We expect inflation to remain benign and less volatile, reflecting lower rate cycles. Shallow rate cycles can also impact more benign equity market cycles.”

The main risks, however, remain a sharp rise in commodity prices due to a global recession, a fractious general election result in 2024, a supply crunch and a shortfall in skilled labor supply.

(with inputs from agencies)