India transformed in less than a decade; different from 2013: Morgan Stanley report

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New Delhi: In a short span of 10 years, India has gained positions in the world order with significant positive consequences for the macro and market outlook, Morgan Stanley Research has said in a report.

The report, India Equity Strategy and Economics: How India Has Transformed in Less than a Decade, highlights the 10 big changes, mostly because of India’s policy choices, and their implications for its economy and market.

“This India is different from what it was in 2013. In a short span of 10 years, India has gained positions in the world order with significant positive consequences for the macro and market outlook. We present a snapshot of these changes and their implications,” the report said.

It added, “We run into significant skepticism about India, particularly with overseas investors, who say that India has not delivered its potential (despite its 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.” It added, “However, such a view ignores the significant changes that have taken place in India, especially since 2014.

Morgan Stanley’s Research had taken these 10 big changes namely, supply-side policy reforms, formalisation of the economy, Real Estate (Regulation and Development) Act, digitalizing social transfers, Insolvency and Bankruptcy Code, flexible inflation targeting, focus on FDI, India’s 401(k) moment, government support for corporate profits and MNC sentiment at multiyear high, while filing the report.

While drawing the data for supply-side policy reforms, the research has gathered the figures related to India’s corporate tax at par with peers and infrastructure.

In 10 years, India’s base corporate tax rate has stayed below 25 per cent while for new companies with operations commencing before March 24, it has stayed at 15 per cent.

In terms of infrastructure development, the research has taken factors like national highways, broadband subscriber base, renewable energy and railway route electrified.

In the formalisation of the economy, Morgan Stanley had taken GST collections, which were showing upward trends over the years, and digital transactions which grew 76 per cent of the GDP.

On May 18, Morgan Stanley said India is poised to grow at 6.2 per cent in the current financial year 2023-24 with improving macro stability indicating that the monetary policy will not have to turn restrictive.

In a report titled “Asia Economics: The Viewpoint: Addressing the Pushback to Our Constructive View”, authored by Chetan Ahya, Derrick Y Kam, Qiusha Peng, and Jonathan Cheung, Morgan Stanley said India enjoys tailwinds — both cyclical and structurally.

“We see healthy balance sheets sustaining the robust trends in domestic demand. Improving macro stability means the monetary policy will not have to turn restrictive, allowing the economic expansion to continue,” the report said.

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