Global brokerage Jefferies said India will be the third largest economy by 2027 owing to consistent GDP growth, flanked by supportive geopolitics and surging market capitalisation. Continued reforms and better corporate culture will also aid this push, Jefferies noted as India has been growing at at 10-12 per cent in USD terms over the last 10 and 20 years. The market cap will likely touch $10 trillion by 2030, Jefferies said.
Mahesh Nandurkar, India Equity analyst at Jefferies said, “Over the last 10 years, India’s GDP has grown by 7 percent CAGR in USD terms to $3.6 trillion - jumping from the eighth largest to the fifth largest economy. Over the next 4 years, India’s GDP will likely touch $5 trillion making it the third 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."
“Continued reforms should maintain India’s fastest growing large economy status. Strong trends in domestic flows have reduced market volatility and decadal low foreign ownership offers valuation cushion. RoE-focused corporate sector with 167 companies having more than $5 billion market cap leave ample choices to investors,” he added, citing several reasons.
Reforms in India: GST implementation, simplified taxation and improved trade efficiencies will help in cleaning up of corporate and banking sector balance sheets and improving governance, the brokerage noted.
Surge in market cap: India’s market cap is currently fifth largest globally at $4.5 trillion but India’s weight in global indices is still low as it is ranked 10th at 1.6 per cent. This will change as market free float rises, Jefferies noted.
Global geopolitics: India's relations with other countries have been improving which could help the economy to grow as well, as per Jefferies.
Strong corporate culture: Strong institutional framework of regulators and intermediaries has helped develop a large domestic investor base, the global brokerage said.