Strong reforms over last 10 years lays foundation of solid growth over next decade: Jefferies (2024)

Strong reform measures initiated by the Prime Minister Narendra Modi-led government in the last ten years have laid the foundation of a solid economic growth in coming decades, Jefferies Equity Research outlook said. It also said that India would become the third largest economy by 2027 and expected to achieve a market capitalization of USD 10 trillion by 2030.

"With a consistent history of 10-12 pe cent CAGR (compound annual growth rate) over the last 10 and 20 years, India is now the fifth largest equity market and market cap will likely to touch USD 10 trillion by 2030," the report said.

It added that continued reforms should maintain India's status of being the fastest growing large economy.

Over the last 10 years, India's GDP has grown by 7 per cent CAGR in USD terms to USD 3.6 trillion, jumping from the eighth largest to the fifth largest economy.

"Over the next 4 years, India's GDP will likely touch USD 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," it added.

Further, it said that GST implementation in 2017 simplified taxation and improved trade efficiencies, akin to the formation of Euro, and 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, it said, adding the government's focus on physical (roads, airports, railways etc) and digital infra (UID, UPI, DBT) has helped the startup ecosystem.

It added that India, with the highest population in the world, also features favourable demographics with a vibrant and young population, whose average age is just a tad below 30 years.

"The young demographics imply that the ratio of working age population is yet to peak, unlike several large economies and other comparable emerging market economies," it said.

The report added that a strong earnings growth profile, track-record of generating peer beating returns, rising India market weight and deep markets should attract incremental foreign flows.

"The Indian markets saw USD 20 billion of equity flows in 2023, though it was not as high as compared to previous levels as a percentage of market cap," it added.

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