India’s economy close to its booming 2000s – Morgan Stanley

Investment has emerged as a pivotal force propelling India’s flourishing economy, Bloomberg reported citing economists at Morgan Stanley on Wednesday.

They suggest that India’s current growth trajectory is similar to that of the mid-2000s, which were characterised by an average growth rate exceeding 8 per cent.

The economists also assert that the Indian economy exhibits potential for further expansion, buoyed by prospects of increased capital expenditure, particularly from private enterprises, augmented exports, and enhanced economic stability.

India’s investment as a percentage of gross domestic product, after a decade-long decline, is on a steady surge and is projected to reach 36 per cent by 2027 from a recent low of 28 per cent in 2021, according to economists, including Chetan Ahya, in a recent note. This uptrend mirrors the period from 2003-2007 when India’s investment ratio surged to 39 per cent.

“We foresee an extensive growth phase ahead in the current expansion cycle,” stated the economists.

India, recognised as the world’s fastest-growing major economy, recorded a remarkable growth rate of 8.4 per cent in the last quarter of the previous year. However, a more comprehensive measure of growth, excluding one-off items, depicted a slowdown, prompting concerns about the sustainability of India’s growth trajectory.

Economists at Societe Generale echoed the sentiment, highlighting investment as a principal catalyst for India’s economic growth. They also noted early indications of a resurgence in private capital expenditure, suggesting a broadening scope of investment beyond public capital expenditure.

In a separate development, India’s top economic advisor expressed optimism on Wednesday, citing sustained indications of capital formation that could propel the economy to expand by more than 7 per cent in the fiscal year commencing in April.