Jefferies, a global investment advisory firm, has turned more bullish on India’s prospectus over the next 10 years. According to Jefferies, India will be the third-largest economy by 2027.

Over the last 10 years, India’s GDP has grown 7 per cent CAGR to $3.6 trillion - jumping from the 8th largest to the 5th largest economy.

“Over the next 4 years, India’s GDP will likely touch $5 trillion making it the 3rd largest economy by 2027, overtaking Japan and Germany, being the fastest growing large economy with the tailwinds of demographics (consistent labour supply), improving institutional strength and improvement in Governance,” it added.

India’s market cap is currently the 5th largest globally ($4.5 trn) but India’s weight in global indices is still low at 1.6 per cent (10th rank). “This should change as market free float rises and some weight anomalies get sorted out. Assuming market returns in line with the last 15-20 year history and new listings, India will become nearly a $10 trn market by 2030 - impossible for large global investors to ignore,” the report added.

Key reforms

Some of the key reforms such as GST implementation in 2017 (simplified taxation and improved trade efficiencies, akin to the formation of Euro); bankruptcy reforms (drove a massive cleaning up of corporate and banking sector balance sheets and improved governance); RERA (Real Estate Regulation Act) (cleaned up housing sector laying the foundation for a multi-year housing upcycle); Govt’s focus on physical (Roads, airports, railways etc); and digital infra (UID, UPI, DBT) have helped the start-up eco-system, the report, authored by among the others veteran Christopher Wood, said.

India now has a macro story as good as any, said Wood. During the two five-year terms of Prime Minister Narendra Modi’s NDA government, India has seen fundamental structural reform which has created the framework for the country to realise its full potential in terms of taking advantage of its intellectual and physical capital as well as its positive demographics.

Amidst this, “it is quite realistic to project 7 per cent real GDP growth and 12-15 per cent earnings growth going forward, as argued in this report. Meanwhile, the bottom-up story remains as dynamic as ever with a flourishing start-up scene and a booming local asset management industry which has meant the stock market is now primarily driven by domestic flows not, as was the case 21 years ago, by foreign flows,” he said.