Morgan eyes 7 per cent growth for India

MUMBAI: Financial services firm Morgan Stanley expects India to grow around 7 per cent on average over the next 10 years with investment, exports and consumption contributing to the growth. While equity market is likely to be the best returning asset class in the country, Morgan Stanley, however, expects the stock market capitalisation to compound at a slower pace of 12 per cent to $6 trillion over the coming decade as compared to 14 per cent CAGR over the previous 25 years.

“We expect India to be one of the high-growth economies among large countries over the medium term. While in the past China has benefited ahead of India from a faster fall (improvement) in the age-dependency ratio, over the medium term India will have this advantage. Indeed, currently India has the second- highest potential growth rate among emerging market (EM) and developed market (DM) economies based on our team’s estimates,” it said.

Though there are many instances in the past when high growth has not translated into robust equity returns, Morgan Stanley said reasonable valuations and the ability of companies to translate growth into earnings are the main factors that would help fetch higher returns. “India seems to score well on both counts,” it added.

With equity MFs, insurance, PFs and pension expected to simultaneously drive equity savings up over the next decade, Morgan Stanley reiterated its forecast about India remaining in the midst of a liquidity supercycle over the medium term.