Morgan Stanley Projects India’s Per Capita Income to Double in the Next Decade

In an optimistic forecast, Morgan Stanley has projected that India’s per capita income could more than double by fiscal 2034, significantly boosting domestic consumption. The brokerage attributes this growth to robust earnings driven by structural reforms and a bullish outlook on Indian equities.

Per Capita Income Projections

Currently, India’s per capita income is estimated to be Rs 183,236 for the fiscal year 2023-24, up from Rs 169,496 in the previous year. Morgan Stanley’s report suggests that this figure could soar to $5,800, translating to nearly Rs 5 lakh per annum at current exchange rates by 2034.

Economic Indicators and Growth Drivers

India’s macroeconomic indicators have been promising, with the March-quarter GDP growth surpassing expectations, credit growth at 15.8%, and a positive purchasing managers’ index. Key factors driving this expansion include a manufacturing boom, energy transition, and improvements in digital infrastructure.

Morgan Stanley highlighted that the near-term catalysts to watch include monsoon rainfall trends and the fiscal 2025 budget. The firm emphasized that the recent seat losses faced by the Bharatiya Janata Party were due to “non-economic issues” and maintained that the government’s focus on macro stability would continue to underpin economic policy.

GDP Growth and Market Valuation

India’s GDP growth is projected to reach 8.2% in FY24, exceeding expectations. Despite a slightly high MSCI India 12-month forward price-to-earnings ratio, the strong fundamentals justify the market’s valuation. Consequently, India remains the top-ranked market in the Asia-Pacific Region, excluding Japan, and among emerging markets.

Morgan Stanley’s analysts are particularly optimistic about ICICI Bank Ltd., Maruti Suzuki India Ltd., GAIL (India) Ltd., and Godrej Properties Ltd., maintaining an overweight stance on these stocks.

Comparative Outlook on Emerging Markets

• South Africa: Upgraded due to potential pro-reform outcomes following elections, though uncertainties remain.
• Mexico: Downgraded to equal weight amid policy uncertainty post-election results favoring Claudia Sheinbaum and the Morena coalition.
• Singapore, Poland, Greece: Maintained an overweight rating due to strong fundamentals, attractive valuations, and supportive economic environments.
• Indonesia: Downgraded to underweight due to fiscal policy uncertainties amid high US interest rates.
• Egypt: Upgraded to equal weight due to improved funding conditions and a commitment to structural reforms.

Government Stability and Economic Policy

The stability of economic policies remains crucial as India navigates through these growth projections. The Modi Cabinet 3.0 has retained top BJP leaders, with notable appointments such as Shivraj Singh Chouhan taking over Agriculture, and Ashwini Vaishnaw overseeing Railways. This continuity in leadership is expected to support ongoing economic reforms and growth initiatives.

Morgan Stanley’s projection of a doubling in India’s per capita income by 2034 reflects a positive outlook for the country’s economic future. With strong structural reforms, robust economic indicators, and continued government focus on macro stability, India is poised for significant growth in the coming decade.