India projected to become Asia’s fastest-growing economy

Morgan Stanley expects India to have the fastest-growing economy in Asia next year, thanks to reforms, a young workforce, and investments
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Morgan Stanley expects the country’s GDP growth to average 7% through 2023

The world’s sixth largest economy, India, is forecast to become the fastest-growing economy in Asia in 2022-2023, contributing 28% and 22% to regional and global growth respectively, according to economists at Morgan Stanley.

The Wall Street bank projects the South Asian nation to create buoyant demand boosted by a young workforce and business investments, along with the reforms adopted by the current government. It also expects domestic consumption to pick up and services exports to hold up better than goods exports.

Asia’s third-largest economy managed to grow by 9.2% in fiscal year 2022, marking a sharp recovery from a 6.6% decline in the previous year, when it was hit by series of Covid-related lockdowns. In 2022-2023, the nation’s GDP growth is expected to average 7%, according to the bank.

“The recent strong run of data increases our confidence that India is well positioned to deliver domestic demand alpha, which will be particularly important as developed markets’ growth weakness percolates into Asia’s external demand,” the bank’s economists said, in a note dated Tuesday and seen by Reuters.

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Morgan Stanley highlighted the shift in policy focus towards boosting the productive capacity, with a series of reforms helping to unleash a powerful dynamic in the economy.

“Lower corporate taxes, the production-linked incentive (PLI) scheme and India as a potential beneficiary of supply chain diversification will catalyze and sustain domestic demand, especially in investment,” the bank added.

New Delhi cut corporate tax rates to lure manufacturers and revive private investment in 2019, and launched the PLI scheme the next year to help domestic producers.

“The economy is set for its best run in over a decade as pent-up demand is being unleashed,” the analysts said, stressing that “healthy” corporate balance sheets and business confidence bodes well for India’s investment outlook.

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