India Set For 6.5 Pc Average Growth Over Next Decade: Morgan Stanley

(MENAFN- IANS) New Delhi, Sep 30 (IANS) India is set for a 6.5 per cent annual growth rate for the next decade and can clock higher growth if the industrial and export sectors expand at a much faster pace, US investment banking company Morgan Stanley said in a report on Tuesday.

The investment banking firm said that India has huge room for growth in the export sector, which can be boosted through a comprehensive reform package.

Analysts had earlier reported that India's economy is set to grow faster at 6.5 per cent in FY2026 GDP, up from the previous expectation of 6 per cent, due to GST reforms. Morgan Stanley also concurred with this view, saying, "In our base case, India's GDP will grow at this rate over the coming decade, one of the fastest-growing economies globally."

Morgan Stanley cited studies that have shown that every job created by manufacturing exports creates two other jobs in related sectors like transportation and logistics.

In this context, India presents a significant opportunity to enhance its export market share, which currently stands at 1.8 per cent, a figure significantly lower than its weight in terms of working-age population and GDP.

Morgan Stanley suggested a comprehensive reform package, including accelerated build-out of public infrastructure, especially for last-mile connectivity.

Further, it highlighted the need for "a systematic approach that incentivises state governments to improve the business environment and ensure that the labour force is adequately skilled."

The report acknowledged that policymakers are already making efforts, but the magnitude of the jobs problem demands a need to accelerate the pace.

At least 84 million people are expected to join the workforce in the coming decade, even assuming that participation rates are unchanged.

"Over the medium term, one pressing issue is that AI will reduce job growth prospects, particularly for the IT services sector – which has been a key source of employment creation – and for the domestic services sector as well," it hinted.

The scenario analysis suggests that an average GDP growth rate of 7.4 per cent will be needed to ensure a stable unemployment rate, assuming participation rates stay constant, the report said.

"If we allow for a gradual rise in participation rate to 63 per cent, an average GDP growth rate of 9.3 per cent is needed to ensure a stable unemployment rate," it added.

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