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India’s Economic Ascendance

By Sunny Bokhari
Associate Product Manager

India appears to be on the cusp of a growth trajectory similar to China propelled forward by domestic demand and the development of digital and manufacturing infrastructure.

India is expected to surpass Japan and Germany to become the world’s third-largest economy by 2027 and the third-largest stock market by 2030.1 India appears to be on the cusp of a growth trajectory similar to China propelled forward by domestic demand along with digital and manufacturing infrastructure development supported by the Indian government. Based on these tailwinds, by 2031, India’s GDP could surpass $7.5 trillion and its share of global exports could double.1


India is one of the countries likely to benefit from the shift of global supply chains with corporations diversifying their manufacturing facilities out of China or what’s generally referred to as the ‘China Plus One’ strategy. India’s labor costs are one-third of China’s, which could attract investment into the country.2 India’s government sees this opportunity and is now spending almost 20% of its budget on capital investments3 to support manufacturing with its ‘Make in India’ initiative. The government aims to increase the manufacturing share of GDP to 25% from the current 15% of GDP.2

India’s Share of Manufacturing is Forecasted to Increase by Over 20% of GDP by 2031

India's Share of Manufacturing is Forecasted to Increase by Over 20% of GDP by 2031

Source: Morgan Stanley Investment Research. *F2032 is forecasted per Morgan Stanley’s research. Past performance is no guarantee of future results. Not intended as a prediction of future results.


The government of India has been leading the push in digitization with its “Digital India” reforms since 2015, with the vision to expand e-governance, empower its citizens with access to government entities and expand digital infrastructure across the country to connect all citizens to the internet. The government of India is hoping to expand access to financial services via digitization by investing in digital payments and 5G infrastructure. An increase in fin-tech applications such as digital payment apps could help democratize the online retail ecosystem in India and help small vendors participate in the documented economy.

Credit Growth and Consumer Spending

Digital initiatives are likely to help more of those in lower income brackets participate in the economy, enhancing the quality of growth across the breadth of the economy. By 2030, India could add approximately 140 million middle-income and 21 million high-income households which could help consumer spending grow from $1.5 trillion now to $6 trillion by the end of the decade.4 Expanded access to financial services could help support credit growth in one of the most under-leveraged countries in the world. India’s ratio of credit to GDP could increase from 57% to 100% over the next decade.1

India’s Consumption Could Double by 2031

India's Consumption Could Double by 2031

Source: Morgan Stanley Investment Research. *F2031 is forecasted per Morgan Stanley’s research. Past performance is no guarantee of future results. Not intended as a prediction of future results.

India’s domestic consumption could increase with expanded access to financial services and a possible increase in disposable income as manufacturing and exports pick up. As more people move up the income ladder, India’s consumption could reach $4.9 trillion by 2030 up from $2 trillion in 2022.1 It is expected that non-grocery consumer discretionary goods and services could have a high wallet share of the future Indian consumer.1

VanEck Digital India ETF (DGIN) offers access to the structural digital growth story of India and could be an appealing investment opportunity for investors looking to seek technology or growth exposure in emerging markets.

Originally published by VanEck on 21 December 2022.

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1 Morgan Stanley Investment Research as of November 2022.

2 Barron’s India.

3 Bloomberg.

4 World Economic Forum, “Future of Consumption in Fast-Growth Consumer Markets: India.”

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