India is different from what it was in 2013, gained position: Morgan Stanley Research report

Interestingly, the report was published at a time when the PM Narendra Modi-led government completed nine years of its rule and is headed for a re-election to power next year.

In 2014, Narendra Modi-led the Bharatiya Janata Party registered a major victory in the Lok Sabha polls defeating the 10-year-old Congress-led UPA government. It won a second straight term in 2019.

Image: UNI

The report, which is titled as India Equity Strategy and Economics: How India Has Transformed in Less than a Decade, showed the 10 major changes the country has seen in the past one decade.

"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. However, such a view ignores the significant changes that have taken place in India, especially since 2014. We highlight the 10 big changes, mostly because of India's policy choices,and their implications for its economy and market," read the report.

The group has taken 10 major 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 multi year high, while making the report.

With regard to the export market, the report said: "We estimate that India's export market share will rise to 4.5% by 2031, nearly 2x from 2021 levels, with broad based gains across goods and services exports."

"The share of profits in GDP has doubled from all-time lows hit in 2020 and are set to rise further – maybe even double from here – leading to strong absolute and relative earnings. This explains India's apparently rich headline equity valuations. Triggered by supply-side reforms by the government, we expect a major rise in investments, a moderation in the CAD and an increase in credit to GDP to support the coming profit growth," read the report.

The report said: "As India's reliance on global capital market flows has reduced, the market's sensitivity to a US recession and US Fed rate changes also seems to be fading."

"India's beta to EM has fallen to 0.6: This is a consequence of improved macro stability and reduction in dependence on global capital market flows to fund the CAD," read the report.

The statement said: " Major shift in consumption basket: As India's per capita income increases from US$2,200 currently to about US$5,200 by F2032, this will have major implications for change in the consumption basket, with an impetus to discretionary consumption."